Tips to Power Up Your Inventory Management System 

Inventory management can be tailor-made as per your business requirements as the optimal system differs from company to company.

But then, no matter, it’s crucial to minimize human error in inventory management. This is where inventory management software becomes an overriding priority for businesses.

Here are seven tips to power up your inventory management software and improve your cash flow.   

#1. Determine Par Levels 

Setting par levels makes inventory management easier for your products. In simpler terms, par levels amount to the number of products you have on hand. So when your inventory stocks go below the predetermined levels, you immediately know that it’s time to order more goods.  

Typically, you order only the minimum quantity that gets you back to par. However, power levels vary according to the product and how quickly the item goes off the shelf, and the time it takes to restock. Indeed, setting par levels is not easy as it requires a lot of research and decision-making. However, having set par levels help systemizes the ordering process. The best part is that it makes decision making quicker, not just for you but also for your staff.  

What’s more, you can adjust the par levels, increase or decrease, as per the conditions.

#2. Precise forecasting

Even demand forecasting is a huge part of inventory management. But then it’s not easy as there are innumerable variables involved, and you could never predict what’s precisely going to happen – but then you could get an approx figure. A few things to look at when projecting future sales:

• Market trends
• Last year’s sales
• Current year’s growth rate
• Guaranteed sales projections from current clients
• Seasonality and the overall economy
• Promotions
• Ad spend

If there’s anything else that helps you have a more accurate forecast, include that.

#3.  First in First Out 

“First-in, First-out” is yet another important inventory management system. As per the system, the oldest stock gets sold first, not the newest supply. This ensures that your perishable products are sold first to not end up with unsellable spoilt goods.   

Even if the products are non-perishable, it’s good to practice FIFO. If the same carton boxes stay at the back in the warehouse, they are sure to expire. Plus, the look and feel of packaging would look dull with time. Also, you wouldn’t want your inventory to turn obsolete lying in the warehouse.    

Notwithstanding the FIFO system’s benefits, you need an organized warehouse to ensure that your new products are put in the back while the new products stay at the front.

#4. Think Dropshipping

Dropshipping is yet another vital model from an inventory management perspective. By adopting this model, you don’t have to store, or ship products as the manufacturer or the wholesaler would take care of your shipping requirements. You don’t have to think about inventory management at all for your business. If you are not sure of the services, you could use dropshipping for a few inventories before going for a big order.  

Several wholesalers and manufacturers offer dropshipping services and even advertise about the same. Sure, when you use dropping services, the products cost more, but you wouldn’t have to worry about storing and holding inventory, storage, and fulfillment. 

#5. Scalable Inventory System

An inventory management system should be scalable as you never know when your business will outgrow the current system because of higher demand and, in turn, increased production in the long term. A scalable system ensures flexibility and could be easily adapted as per your business requirements. 

A non-flexible and outdated inventory management system could prove costly for your business. Quite the contrary, implementing an efficient and up-to-date system will help do away with obstacles that come in the way of your routine operations.   

#6. Inventory Controlling 

Inventory controlling is one of the most critical factors of successful inventory management because it links to merchandise and financial management. Inventory controlling gives decision-makers with a broad overview of the inventory situation in the warehouse. In fact, ABC and XYZ analyze and KPI monitoring, which is part of inventory controlling, ensures transparent warehouse operations. Notwithstanding the analysis used, the accuracy of the analyzes depends on the data being analyzed. This makes it essential to use proper data integration and management.  

#7. Frequent Auditing 

Frequent auditing of your inventory stock is vital. Most of the time, you’ll be depending on software and reports to know how much product you have in stock. However, several methods could be used to ensure that facts are all right. E.g., You could use the physical inventory that’s done once a year. Or spot-checking could be done regularly for problematic or fast-moving products. Or cycle counting, on a daily, weekly, or monthly basis on different products on a rotational basis.  

Rounding up 

Effective inventory management can prepare the business for the unexpected times ahead. It not only reduces cash flow problems but also studies sales patterns to predict future sales, which, in turn, helps businesses profit.  In short, with better inventory management in place, businesses have increased chances for profitability and survival. 

So, it’s better late than never to take inventory management seriously and stop leaving money on the table. So opt for the right inventory management technique for your business and start implementing them from today. 

Guest article written by: I am Jennifer Warren- a blogger and content manager at GoodFirms – a review and rating agency that offers a level playing to businesses of all sizes.