You’ve got your business up and running.
You’re now selling your products all over the world.
Right now, it probably feels pretty good, though it admittedly takes a lot of work, time, and dedication.
To do that, you need to be good at managing your inventory.
Sounds pretty easy, right?
Not so fast. Inventory management is a challenge. And the more you grow, the more challenging it becomes.
How many times have you heard of businesses having to hold massive clearance sales to get rid of excess items?
These unfortunate situations are often the result of poor inventory management practices.
They lead to businesses losing money, not just in ongoing storage costs but in lost sales.
To avoid this, you need to adopt the most effective inventory management techniques.
So what exactly is inventory management?
Inventory management is basically making sure you have enough inventory at the right time on hand.
It should be noted that inventory management is different from inventory control.
Inventory control is where you track what you have in stock already. There are plenty of inventory control methods which help you do this.
Practicing good inventory management may seem like a lot of busy work on the surface, but its importance can’t be overstated.
For one thing, effective inventory management helps you increase your revenue.
Products that aren’t moving are simply burning a hole in your pocketbook.
If your products are sitting in storage, they’re not making you any money. Inventory management will help you avoid that.
Good inventory management also helps you prevent shrinkage. Shrinkage is where parts of your stock go missing.
Without inventory management, you likely won’t know this is happening. It will remain a mystery why you seem to not be making as much money as you think you should.
Now that we’ve established what it is and why it’s important, you’re likely asking how to manage inventory in the smartest way.
Even if you oversee a small operation, you can still benefit greatly from these techniques.
The Most Effective Inventory Management Techniques
Establish par levels for products
One of the first steps to effective inventory management is to set par levels for your products.
What’s a par level, you ask?
It’s very simple. A par level is the smallest amount of an item that you need in stock at all times.
You order more of that item the moment that your inventory falls lower than the par level. Usually you’ll order enough to get you above the par level.
So it’s the opposite of golf. You want to stay above par.
You’ll need a par level for every product you sell. If you only sell one thing, you’ll only have one par level to worry about.
Plan for problems ahead of time
You need to have contingency plans in place for your inventory so you’re not caught napping.
What will you do if your warehouse suddenly runs out of room due to a sudden surge in products?
What happens when the manufacturer you work with can’t product an in-demand item at the worst time?
What do you do if one of your products sees a huge surge in demand but you don’t have enough of it on hand?
These are just a few situations that could happen, and if you’re unprepared, it could lead to some upset customers and lost money.
If you have contingency plans in place, you’ll be ready for problems when they inevitably occur.
Build solid relationships
As a business, you’re going to be working with your suppliers a lot.
Make sure you have a solid relationship with them so they go the extra mile in helping you when you need it.
Sometimes you need to restock products very quickly.
Other times you need more storage space.
You may even need to return items from time to time.
If you build that positive relationship with your suppliers, you’ll be able to work with them more easily.
The key to building that relationship is through communication. If you always keep them in the loop, they’ll feel more like a partner who is willing to help at the most important moments.
FIFO stands for “first-in, first-out”, and it’s really simple to follow.
The first stock that you get in should be the first stock to go out.
In other words, you should prioritize selling your oldest items first.
This is an obvious rule to follow when you’re selling perishable items, but what if you have non-perishable stock?
The same rule should still apply in that situation. Packaging materials can wear out over time, so it’s a smart move to not keep them stored for too long.
It takes a lot of work, but conducting an audit is a good strategy for managing your inventory.
Most of the time, you’ll rely on a system for keeping track of your products. But every so often, you should perform an audit to ensure your actual inventory numbers line up with what your system says.
This can be done via a spot checking audit, where you pick a product, count it, and double check the inventory number to see if it matches.
You might also do a physical inventory audit, where you count your entire inventory. This can take a lot of time, and many companies only do it once each year.
Cycle counting is another auditing method, where the whole inventory is counted, but only one product at a time during the year. The higher value the product, the more it will be checked. This is similar to a physical inventory audit, only not as disruptive.
Use inventory management software
Inventory management can be overwhelming, but you don’t have to do it manually.
Technology is here to help you.
This helps you avoid production shortages and inventory excess.
It’s a cost-effective way of staying on top of your inventory. You’re not going to get caught by surprise.
Inventory Management Doesn’t Have To Be Difficult
Now that you know some of the best inventory management methods, you’re ready to get started.
These techniques are only a sample of what can prove useful to you.
Using ClickFunnels is also helpful in managing your inventory.
Sales funnels also help you get to know your customers, which will help you know what they want and what you can provide for them.
How do you handle inventory management? What are some of the challenges you come across most often? Comment below and let us know!