5 Tips for Managing Your Inventory
Inventory management is the process of tracking your products to ensure you have the right amount of each item at the right time. It includes ordering, storing, tracking, and selling your goods.
Managing your inventory is important so you don’t miss out on business because you’re out of a popular item or lose money because you have too much of an item in stock. It can help maximize your sales and minimize your costs of storing excess inventory.
1. Use data to make predictions
Track your sales so you can monitor spikes and slumps in your business. By tracking your sales, you’ll be able to better predict when your next spike will be, so you can order extra products to keep up with demand. And, you won’t be as surprised by a slump and can decide if you need to plan a special promotion to move some of your products out the door.
Keep an eye on market trends in your industry so you can determine what the trendy items will be. That way, you won’t be stuck with last year’s castaways, but can sell this year’s must-have items.
Finally, monitor your industry’s health. If the industry is expected to grow, you might need to carry extra stock to keep up. Or, if your industry is expected to stay stagnant, you can decide if you want to order fewer items the next time around.
2. Pay attention to what’s not selling
While it’s important to keep your most popular products in stock, make sure you also know what products are not selling well. If you’ve had the same item for a year, you might consider trying different strategies to move it out the door – like putting it on a sale or offering a special discount. Then, when you’re starting to run low, don’t reorder it so you don’t get stuck with it again.
3. Use the FIFO method
Consider selling and stocking your items using the first in, first out (FIFO) method. This is especially important if your sell anything perishable. For example, if you sell floral arrangements, sell the first ones you made first, before the flowers start to wilt.
If you don’t sell perishable items, you can still use the FIFO method. Keep your older items in the front of your racks and add newer items to the back so customers are more likely to purchase the older items first. Mimic that method in your stockroom so your team will grab the older items first when it’s time to restock.
4. Do a physical count
Even if you think you always know the quantity of each item, regularly do a physical count to doublecheck.
For your fast-moving products, consider having your staff do weekly spot-checks.
Then, hold an annual inventory count. During a slow period for your business, close your store for a day or two. Divide your store into sections and assign each team member a section. Tell them to physically count each item and consider asking them to visually inspect each piece, too. By visually inspecting each item, you’ll be able to remove any damaged or broken products and ensure that everything is labelled correctly.
Spot-checks and annual counts can help you find out if you have a shrinkage problem. Shrinkage is a reduction of inventory. The average retail business has a shrinkage rate of 1.33% per year. It can be caused by shoplifting (36.5%), employee theft (30%), administrative errors (21.3%), vendor fraud or error (5.4%), or for unknown reasons (6.8%). Regular physical counts can help you investigate the reason for your shrinkage to help prevent it in the future.
5. Think before buying in bulk
Your suppliers or vendors might offer a fantastic deal if you buy in bulk. Before you take the deal, make sure you’ll be able to sell that much product. Otherwise, you might end up with too much in hand, which could lose you money. You don’t want your cash tied up in merchandise that might not sell, and you’d have to find a way to store everything.
Look at your historical data and your predicted sales to determine how much you can expect to sell. If you can’t sell enough to justify bulk ordering, consider partnering with another business to take advantage of the bulk discount.
Managing your inventory can help your small business save money. Click here to learn more ways to save money.