Effective inventory management is the backbone of any successful business, whether you’re managing a small retail shop or a big store. The right inventory management system can help you minimize costs, optimize stock levels, and meet your customers’ needs.
This article will walk you through the basics of inventory management and give you tips for choosing the best inventory system.
What is inventory management?
Inventory management is the process of overseeing the flow of goods in and out of your business. It involves tracking stock levels, orders, sales, and deliveries to ensure you always have the right amount of stock.
There are various types of inventory – raw materials, work-in-progress, and finished goods. Each of these requires careful monitoring to keep your business running smoothly.
Why is inventory management important for your business?
The primary objective of an inventory management system is to balance supply and demand while controlling costs. This helps you avoid running out of stock or overstocking. Here are a few key reasons why a good inventory tracking system is crucial:
- Cost control: proper stock management reduces the risk of overstocking, which ties up capital and increases storage costs. It also prevents shortages that can lead to lost sales.
- Improved cash flow: having a robust stock management system helps you to adequately meet customer demand and have sufficient cash flow.
- Customer satisfaction: an efficient inventory management system ensures timely deliveries which keeps customers happy and coming back for more.
- Streamlined operations: good inventory management improves the flow of goods through your supply chain.
Features of a good inventory management system
An inventory management system is your business’s secret weapon – it helps you monitor, manage, and control the stock you have on hand. With the right system in place, you can ditch the manual work, get real-time updates on your inventory, and make smarter decisions.
Features of a robust inventory management system include real-time tracking, automation, forecasting and reporting. A well-implemented system simplifies stock management and helps you stay efficient.
The best inventory management system depends on your business model and needs. Let’s look at key inventory management techniques that can make your business more efficient:
- First-in-first-out (FIFO): this is common in industries that deal with perishable goods. FIFO ensures that the oldest stock is sold first to avoid stocking of expired goods.
- Just-in-time (JIT): this method aims to keep stock levels as low as possible by ordering goods only when they are needed. It reduces the cost of holding stock. It requires precise demand forecasting.
- ABC analysis: this technique categorizes inventory into three groups (A, B, and C) based on value. High-value items (A) receive the most attention, while lower-value items (C) receive less frequent reviews.
- Economic order quantity (EOQ): EOQ calculates the ideal order quantity to minimize the total cost of ordering and holding stock.
- Safety stock: this is when you keep extra inventory on hand to cushion against fluctuations in demand or supply chain delays.
3 best inventory management tools in the market
Now that we’ve covered the basics, let’s look at the top 5 inventory management tools that can help you streamline stock management and keep track of your inventory:
- Ordoro is an all-in-one inventory and shipping software designed for big and small eCommerce businesses. It excels at inventory tracking across multiple sales channels and also integrates smoothly with major eCommerce platforms. It has a free plan if you’d like to test it out.
- Katana lets you set reorder points for each item, so you’ll always know when it’s time to restock or produce more.
- With Zoho Inventory you can easily monitor stock levels, manage activity across multiple warehouses, and generate reports in seconds. Plus, it integrates seamlessly with other tools to streamline your entire workflow.
How to choose the right inventory management tool
Here are a few things you should consider the following when choosing an inventory management system:
- Business needs: evaluate the size of your business and the complexity of your inventory. Do you need a tool for simple stock management or something more advanced?
- Key features: look for features such as real-time tracking, automation, and reporting capabilities.
- Budget: choose a tool that fits your budget.
- Integration: do you need a system that integrates with your existing platforms, such as accounting software or e-commerce sites?
Inventory management eBook
Inventory management can be complex, especially as your business grows. We have written an eBook to help you tackle common inventory management challenges such as;
- Overstocking or understocking: holding too much inventory increases storage costs while understocking leads to lost sales and dissatisfied customers.
- Lack of real-time data: without an automated inventory tracking system, businesses may rely on inaccurate stock data, leading to poor decision-making.
- Multi-channel management: managing inventory across multiple sales channels (e.g. offline and online) can be tricky without the right tools.