Did you know that inventory is only accurate 63 percent of the time in retail? Furthermore, one-third of businesses have missed a shipment deadline because they have sold a product that was not actually in stock.
These inventory management statistics show why this is an area that all businesses need to work on. However, a lot of business owners can feel quite overwhelmed when handling this part of their company.
That is why we have put together this guide. Below, we will discuss some of the modern tools and techniques you can use to improve your inventory management efforts.
What is inventory management?
Inventory management is the process of ordering, using, storing, and selling your business’s inventory. This includes managing finished products, components, and raw materials, as well as the processing and warehousing of such products. You can check out this guide on inventory management by Lightspeed for a more in-depth understanding.
Modern inventory management techniques
To ensure you do not fall into one of the negative statistics we mentioned above, you need to embrace modern inventory management techniques in your business. Here are some techniques to help you get started:
Inventory forecasting is challenging if you do not have an effective inventory management method established. Even when you take precautions, you could find yourself ordering too much of an item.
Dead stock can kill your bottom line. However, there are a number of approaches you can use to help with this, with bundling being a great choice. Not only is this regularly used to upsell, but it can move stale inventory as well.
You can effectively bundle items by adding a surprise-free gift to orders. By keeping this “free item” a secret, it means you can easily switch the item up depending on the stock that you need to shift at that moment in time.
Not only is this going to help you to move on old inventory, but it will ensure that your customer base is delighted and feels special as well. After all, who doesn’t like getting something for free?
Economic Order Quantity
Economic order quantity (EOQ) is used to calculate the ideal order quantity that is required to purchase based on a number of different variables, including total costs of production, demand rate, and other factors.
You can use this rate to reduce related costs. It helps you to determine the greatest number of products you will need to order to identify minimum order quantities.
The EOQ formula also factors in the number of units in the delivery and the inventory unit storage costs, which helps you to free up some cash that you may have had tied up in inventory.
Track KPIs effectively
To manage your inventory effectively, you need to track the right KPIs. By doing this, you will be able to determine your company’s pain points and determine what to do about them.
If you frequently experience stockouts, your customer experience is going to suffer. At the same time, you will be losing money if you are experiencing shrinkage, so you will need to find a solution for this.
Some of the different KPIs you may want to track include the likes of average inventory, forward weeks of supply, stock-to-sales ratio, and self-through rate.
Just in Time (JIT)
Another approach you can use is Just in Time (JIT) inventory management. This will reduce the volume of inventory you keep at your business. It is a risky technique, though, as you will only buy inventory a few days prior to it needing to be distributed.
Because of this, you need to be sure that your suppliers are reliable enough to get your products to you on time. This approach fully depends on your suppliers, so if you’re not sure that they can fulfil your needs reliably, hold off on using the JIT approach.
However, suppose you do have reliable suppliers. In that case, JIT can help you to reduce costs in terms of inventory holding, as you can keep your stock levels low and eliminate situations whereby deadstock is sitting on your shelves for months and months on end.
Nevertheless, the JIT inventory management approach demands that your company is highly agile and can handle a much shorter production cycle.
ABC inventory management
ABC inventory management is a technique that is based on putting products into categories based on how important they are, i.e. A being the most valuable. After all, not items are of equal value, meaning more attention should be paid to products that have the greatest popularity.
Despite the fact that there are not any hard-and-fast rules, ABC analysis leans on cost significance, inventory value, and yearly consumption units.
The key here is for every category to be operated separately, especially when human resources, allocation of funds, and selective control are needed.
ABC inventory management fosters strategic pricing, enables inventory accuracy, helps determine a tiered customer service approach, allows for better resource allocation and time management, and aids demand forecasting by assessing the popularity of a product over time.
Finally, bulk shipments are worth considering. This is based on the concept that it is almost always cheaper to buy and send products in bulk. Bulk shipping can be applied when products are in high demand, helping you to capitalize on great savings.
However, you do need to be careful with this approach. Make sure you do not bulk buy items you are going to struggle to get off the shelves. Also, you are going to need extra funds to spend on warehousing inventory, so do factor this into account.
This approach works best for products that are staples, have a predictable demand, and boost long-shelf lives.
The best inventory management tools
Now that you know about some of the best inventory management techniques on the market today, let’s take a look at the best inventory management tools so you can keep everything in order:
There is only one place to begin when it comes to inventory management, and this is with Lightspeed. Lightspeed gives you the ability to take control of your stock effectively with automated inventory management. This means you can plan ahead and successfully reduce waste.
There are many modern and beneficial features you can make the most of. You will be able to review your inventory in real-time, automate your recurring orders to suppliers, and get alerts when your stock is low.
Aside from this, you can track how much of your inventory has been wasted, sold, or purchased by making the most of the innovative and advanced reporting features.
If Lightspeed is not the solution for you, you may want to consider Orderhive. Orderhive has plenty of integrations and a number of advanced features.
There are many different tools you can use, including over ten different eCommerce tools, partial and zero inventory dropshipping, low-stock and out-of-stock alerts, barcode scanning support, and automated purchased order (PO) creation, and you can easily transfer stock between warehouses.
Orderhive also makes it possible to manage expiry dates, as well as a lot, batch, and serial numbers. There are numerous reporting options as well, including COGS, i.e. cost of goods sold.
Another advantage of using Orderhive is that it can be easily integrated with popular apps like FedEx, WooCommerce, Amazon, QuickBooks, and Etsy.
There are five different payment plans, so you should be able to find one that suits your needs and budget.
Another solution worth considering is Megaventory. This is an operations management solution that helps you with tracking the assembly or bundling process, as well as overseeing fulfilment, ordering, and inventory.
The system is easy to implement, making it the ideal choice for small to medium-size manufacturing businesses.
You can make the most of the likes of barcode scanning and printing, automatic stock alerts, quick and bulk updating options, tracking customer contact information, and much more.
Finally, we have Upserve, which is ideal if you are looking for an inventory management solution for your restaurant or food-based business. It boasts a strong POS system with many inventory capabilities and features.
The software is an app- and cloud-based, with a mobile app for both iOS and Android devices. This means you can stay on top of your restaurant no matter where in the world you are.
You can leverage a whole host of employee management and optimization tools. You can also track real-time ingredient inventory, compare expected and actual stock reports, scan inventory from your mobile app, use one-click purchasing for inventory, and automatically replenish quantities whenever you receive new stock.
There are more than 40 different programs that Upserve integrates, including online ordering tools, reservations, and bar monitoring.
Final words on improving inventory management at your business
So there you have it: everything you need to know about managing inventory at your business. We hope that the tools and techniques that we have mentioned above will help you to get on top of this area of your business so that you can reduce losses made due to inaccurate inventory management.