SUPPORT AND SAVE: OWNING YOUR INVENTORY
How you choose to manage your stuff – meaning your inventory – could potentially interfere with how much money your business makes. Even worse, it could result in you losing money. In an effort to help provide a path around these obstacles, we’ll be covering techniques to keep your inventory in order and avoid some of the most common merchandise mishaps. Let’s get started!
Why it’s important
We understand that not all businesses operate off of inventory. Retailers and eCommerce friends, this conversation is for you. For our service-based companies, perhaps think of the following information as a way of managing your internal inventory. Your time, resources, and efforts as an individual and your associated services are as equally limited, yet equally manageable when executed correctly.
Managing your inventory helps you plan ahead for what you’ll need later on down the road, projects trends for upcoming orders, and so much more. It saves you money, time, effort and EVEN potential detriments like lost business due to lack of inventory of a loyal clients’ favorite product.
Common Issues We Can Easily Avoid
No Centralized POS System
It’s common practice for small business owners to resort to using a spreadsheet, written list, or even sticky notes to track inventory. Using a written-based system without at least an electronic backup in an inventory tracking system is the quickest and surest way to lose hold of your business and its progress. An eCommerce management system will save you time, and most importantly - money as you work to expand your business.
Wrong Inventory Numbers
Take a moment and think back to some of your busier times of the year. Was there ever a time when you went to fulfill an order, or check your backstock on a product that a guest was truly interested in, but was greeted with an empty shelf or drawer? Lack of up-to-date numbers on your inventory can result in order cancelations, bad reputations, and loss of business. Like we said before, poor inventory management might be the quickest way to fail as a business.
Over or Under-stocking Product(s)
Having an excess or shortage of inventory can tie up finances and the necessary capital to fuel other needs such as marketing initiatives or repairs for the location of your operations. Ultimately, you could be forced to claim a loss on products, should they fall out of season or market interest, which is financially detrimental as well.
So! With that in mind, where do we go from here? For starters, let’s dive into some basic tips and tricks on how to pave the way towards implementing better practices that will keep your inventory stocked, organized, and constantly moving along with the upward trends of your industry.
Tips and Tricks on How to Maintain
Let’s talk about ways to turn you and your staff into inventory experts with these tips and tricks.
Plan Ahead
Forecasting for your inventory may seem daunting, but it can be a lot easier than it looks. Plan ahead by referring to your inventory history, as far out as 12 months prior. We also recommend including a review of your marketing and sales trends. These numbers can be more telling of what your customers do and don’t like, whether it be through interactions, or actual reviews or recommendations within the comments, etc. Based on those numbers and patterns, assess your needs accordingly and stock, where you feel, will be most necessary to move ahead efficiently.
Additionally, it’s worth mentioning that if you don’t have this kind of information available to you, because it doesn’t exist, we highly recommend picking today as your first day of making that change. Not having this kind of evidence can be costly, and deadly to your business.
Set Minimum / Maximum Stock Levels
The Minimum Stock Level, or MSL, is the calculated average inventory number you should maintain at your business. This number varies, as the actual number is based on a specific formula involving your maximum usage and lead times. This number in turn, will vary with market changes and fluctuations.
Make sure to systemize your inventory based on your findings so you can periodically assess your stock over time. Also make sure that you establish a maximum that best fits your business, as it can be easy to want to overcompensate out of fear. Let your numbers be your guide!
These acronyms, combined with good housekeeping of your storage area, will ensure a more manageable inventory.
ABCs and FIFOs
Prioritizing your products or services will help keep you mindful of how much and when you will need them. A couple of acronyms to remember that will help you keep priorities managed are ABC and FIFO.
The ABC analysis, breaks down your inventory into the following prioritized categories:
A items: These items are your best-selling items, which are the most valuable to your business.
B items: Your B items are items that don’t sell regularly but are a bit more costly to have, giving them an average level of importance.
C items: Any and all items that remain that make up the bulk of your inventory costs, while also somehow contributing to your bottom line.
FIFO, or First in First Out, is common practice in many businesses that operate with an inventory that is perishable. This practice can also found amongst retailers as well. FIFO refers to putting the first products received out on the shelves or on the floor, then rotating out with new shipments as they arrive. For perishable product businesses, this ensures that health and safety codes are accurately followed, avoiding any liability on the business’ end. For retailers, it’s an easy way to make sure your offerings are current and up to date with the latest trends.
These acronyms, combined with good housekeeping of your storage area, will ensure a more manageable inventory.
Set a Plan B (and C, and D…)
The old saying goes “ hope for the best, plan for the worst”, especially amongst business owners. If you don’t have a Plan B in place, things can go south fast.
Ask yourself questions like “what do I do when sales jump and I run out of a product?” and “What if my supplier runs out of their inventory?” Putting yourself in the mindset of creating solutions quickly, will help alleviate these kinds of problems.
Lose the Pen and Paper, Find the Central System.
We mentioned earlier the importance of not depending on paper tracking. As our commerce industries continue to rely heavily on technology and paperless options, the use of pen and paper inventory management, simply won’t cut it. Take time to invest in a management system that tracks your inventory, sales, and helps with forecasting for the future. You’ll be glad a year from now when you are certain that everything you need to analyze your business is mere clicks away.
As Usual, Be Transparent.
You’ll hear us mention this as we talk about best practices for any business, but that’s because we believe it’s a point worth mentioning. The power behind being transparent can be profound for the reputation or future of any business. Maintaining open communication with your staff, your vendors, and guests establishes a sense of closeness or connection with your brand.
For some generations, it is the best way to ensure brand loyalty. The individual feels like they are a part of the journey, and part of the team when you are open and honest with them. Now, when products are selling out, or when something is late to the store, you’re greeted with understanding and genuine support, rather than an angry, now-lost customer.
Routine Audits, Your Best Friend
Make routine audits of your inventory management system a priority. Depending on your business, we recommend doing this: Once a week, once a month, or once every quarter, depending on the nature and volume of your business.
Pro tip: Plan your inventory audits alongside your marketing audits as well. Often, the results of the two worlds go quite well together.
Dropship When You Can
Over the last several years, “dropshipping” has become more popular amongst e-commerce business. This means instead of keeping the entire purchased inventory in-house, the vendor holds onto the inventory for you until the demand arises.
This can save costs on storage and holding onto inventory that you may not end up needing. Not all vendors are practiced in the art of dropship, but it never hurts to ask just in case.
Conclusion
We know the e-commerce industry is a tough one. Trust us - we’ve watched several businesses work through the beginning stages of getting their inventory set up and managed efficiently, even for some of the most seasoned individuals. If you’re one of those veterans who’ve come by for a quick refresher, we hope you’ll take the time to check out what else Magento has to offer. If you need a little bit of help, don’t hesitate to reach out and contact us.
