On one hand, every company’s inventory is a carefully curated collection of inanimate objects ready for sale. But, on the other, it can be a confounding, slippery, and unpredictable creature that can shrink too small or grow too big; despite your best efforts to keep it contained. If your inventory has been getting the better of you lately, do not give up on showing it who is boss.
Check your math
Getting the upper hand on inventory is essentially one part mathematics and another part strategic planning. You need to have accurate inventory counts as well as the controls in place to regulate quality and keep things moving.
As is true for so much in business, timing is everything. Companies need raw materials and key components in place before starting a production run, but they do not want to bring them in too soon and suffer excess costs. The same holds true for finished products — you need enough on hand to fulfill sales without over or understocking.
If you are struggling in this area, re-evaluate your counting process. One alternative to consider is cycle counting. This process involves taking a weekly or monthly physical count of part of your warehoused inventory. These physical counts are then compared against the levels shown on your inventory management system.
The goal is to pinpoint as many inventory discrepancies as possible. By identifying the source of accuracy problems, you can figure out the best solutions. Of course, you cannot conduct cycle counting once and expect a cure-all. You will need to use it regularly.
With all this data flying around, you need the right tools to gather, process, and store it. So, investing in a good inventory software system (or upgrading the one you have) is key. As the saying goes, “garbage in, garbage out” — imprecise information coming from your current system could be leading to all those write-offs, inflated costs, missed sales, and lost profits.
As always, you get what you pay for: investing in a new software system and then paying ongoing maintenance fees (which are usually recommended to keep it running smoothly), could seem like a bitter pill to swallow. However, in the long run, strong inventory management can pay for itself.
Another way to use technology for inventory purposes is as a communication tool. Knowing which products are most popular and which are not will go a long way toward developing correct purchasing and stocking levels. Consider using online surveys, email contests, and even social networking (such as a Facebook page) to keep in touch with customers and gather this information.
Show some tough love
In an ideal world, every company’s inventory would be its best friend, but do not be surprised if you have to regularly show yours some tough love to keep it from making a mess of your bottom line. Let us help you identify the best metrics and methods for managing your inventory.