Businesses find success based on their ability to maintain a healthy balance between their demand and supply. The role of an inventory manager is to take stock of the products in the warehouse and ensure they can meet customer demands. An excess stock or the lack of it can both cause irreversible damage to businesses. Not sure how to effectively manage your inventory and warehouse? Here are seven practices or tips that you could use.
1. Invest in Technology
Technological innovation makes it possible to automate mundane tasks. When you invest in inventory software with scanner, you can reduce the scope for human error and have a clear picture of your warehouse’s stock. Cloud-based solutions for stock tracking provide alerts when your stock runs low and you need to restock your warehouse.
As most of the inventory management systems are programmed to analyze your business patterns, you can also get an effective prediction on the stock you should hold in your warehouse at different points in the year based on your past sales. This helps you decide if you have the right amount of stock, the financial bandwidth to order, and the facilities to stock the products.
2. Find The Sweet Spot
Tying around 20 to 40 percent of your working capital to the inventory could seem like a great idea. It ensures that your customers do not have to wait too long for their products to be delivered. Most businesses might increase their inventory budget over a period to reduce the waiting time. But remember to put a cap on your spending at 40 percent and find your sweet spot for stock maintenance while sticking to a budget. This means identifying how you can cut down on your inventory while ensuring you are not understocked at the same time, advised Abdallah Salloum. He was working for GE Healthcare and leading the company’s flagship MRI supply chain division to $2.5B in revenue. Mr. Salloum was responsible for key changes to the Supplier Management organization spanning 17 business segments, managing 2,800 suppliers and driving $19B in annual revenue. He has an MBA in strategic management from Davenport University, and received his bachelor’s degree from William Tyndale College.
3. Eliminate Obsolete Inventory
Deadstock or obsolete inventory is a problem that every business owner dreads. Sadly, that is unavoidable in most cases. Deadstock is the inventory you piled up under the assumption that it would sell, but sadly it did not. This leaves your warehouse overflowing with goods, reducing the available space for your fast-moving stock, and impacts your bottom line negatively. A common cause for deadstock is the lack of proper communication between the warehouse and the management. As the warehouse is not aware of the changing priorities of the customer and the management’s marketing ideas, they might stock more products than what the company can sell. The goal is to eliminate the deadstock using promotional tools like discounts, offers, and freebies.
4. Improve Inventory Forecasting
Using data analytics, AI, and other forecasting methods available, you can efficiently predict the future demand for a product. Forecasting will help you improve your inventory levels in the warehouse. While overstocking could lead to waste and damage, lack of stock would increase the waiting time, and you could risk losing your customers. If you are battling with a low stock situation, a temporary way to fix it is to remove the minimum order quantity clause, extending your lead times, and sharing the details of your sales with your suppliers. When your suppliers see that you have consumers ready to buy and wait for your product, they might deliver sooner, keeping your inventory healthy.
5. Switch to a Lean Warehouse Model
Globalization and the Internet revolution have changed the way customers shop. Everyone is used to the one-day delivery model of their goods. With businesses focusing on a customer-first approach, it is important for companies to reduce the handling time and ship goods at the earliest. Adapting a lean model in warehouse management will considerably reduce the loading and unloading of trucks, stock taking, sharing information, and shipping goods can happen more effectively. This will increase effectiveness and boost customer satisfaction.
6. Organize the Workplace
Clutter, confusion, and lack of proper organization could impact productivity. Encourage your employees to clear their workstations—the same works for organizing the warehouse too. Ask the inventory managers to log every stock in the warehouse, identify the deadstock, and dispose of any unnecessary items taking up excessive space. This would not just improve efficiency but also reduce errors and increase workplace safety.
7. Train Your Employees
Lack of on-the-job training is why most employees perform in the first few months at any organization. They are prone to making mistakes which can cost the company a fortune. Instead, spend ample time on training your employees and helping them learn the basics of inventory and warehouse management. Make safety training mandatory to avoid any unpleasant incidents at the warehouse and impact your business negatively.
Following these practices will ensure an easy flow of inventory at your business. Do let us know if you tried any of these tips in the comments section.