In basic terms, inventory management is the process of acquiring, storing, distributing and tracking your products. In other words, it is how to itemise or catalogue your products through a system to help you monitor your supply chain.
It is an almost certain way of evaluating the health of your stock and ensuring that the right quantity of stocks are available when you need it, and where it is needed.
In essence, it will serve as a good gauge in helping you cut losses, detect inefficiencies as well as quickly fix them to keep your business on the sail of increasing sales and maximizing profit.
Whether you’re — starting out new as an eCommerce merchant or — a seasoned veteran, inventory management is one of the key elements that should be added to your portfolio of strategies in your quest to succeed.
This article seeks to explore some common tips for managing inventory successfully.
Good inventory management software
This should be your first and the single most important step in your inventory management journey. Relying on the age-old pen and paper method can work but that is painstaking and time consuming. This is because merchants would have to count products one-by-one to know the quantity available and if there’s the need to order for new stock.
With, inventory management software, merchants can automate their management process — helping them to track and order the required products on a real-time basis depending on customers demand. Merchants can automatically track best selling products and place orders for replacement on a timely basis if the need be. This frees up merchants some time to concentrate on other areas of importance to enhance customer satisfaction.
There are a good number of inventory management software tools in the market that could be a good pick to set you running.
Label and tag inventory with SKU and UPC numbers
Another great inventory management tip is to label and tag your inventory with SKU numbers and barcodes.
SKU simply means Stock Keeping Unit. Using SKU number on each and every product helps in differentiating one product from another. This can be very helpful in situations where a product needs to be found quickly.
SKU also helps merchants differentiate similar products from different suppliers. Example, if you stock clothes and you order rompers from two different suppliers, each product having their own unique SKU will help you tell which product is from which supplier.
Related to SKU is the Universal Product Code (UPC). UPC or universal barcode consists of 12 numeric digits that are uniquely assigned to each trade item. It acts like an SKU but it comes in the form of a barcode which can be scanned into a live GSI powered database.
GSI is the global organisation that develops and maintains the global standards designed to improve the efficiency, safety and visibility of supply chains across physical and digital channels. Therefore, make sure you get all your UPC numbers from only GSI or a certified valid reseller.
Use First in, First Out (FIFO)
First in first out (FIFO) simply means exactly what you think, the goods that come in first should be the first ones to be shipped out when an order comes, in a chronological order. This method is especially important for businesses that stock perishable goods like food, beverages, makeup and other organic or organic-based products. The FIFO method helps keep each delivery fresh and in the best condition possible. This ensures merchants do not lose money as a result of damaged goods.
Even though the first in, first out method is highly recommended for perishable goods, that doesn’t mean it cannot be adopted for non-perishables. Non-perishable goods can expire or become unsellable too if they are stored beyond a certain time frame.
An easier way to implement the FIFO method is to model your stockroom or warehouse by ensuring that new stocks are placed at the back while old stocks are moved to the front.
With an SKU and UPC in mind, merchants easily tell when a particular product, or a batch of products was bought in and therefore align them in the order in which they should be shipped out to customers.
Identify low-turn stock
If your business isn’t specialized in making or selling just one item, then you have to keep an eye on each type of product you have and how well each type is selling. Chances are you’ll see some of the products sell better than others.
You therefore, need to identify and label your products that are low-turn. Products labeled “low-turn” should not have moved any units for a minimum of six months. You should know though, that this isn’t a definite rule as there are various reasons why a product might not be moving quickly. The sales velocity or the stagnation of a product might be different from another depending on a number of factors such as: the seasonality of the product. Example, Christmas decorations will probably only sell when it’s close to December.
Once you’re sure a product is not moving because it’s just not in demand, then you should find ways of clearing them from your inventory. You can achieve this by offering discount sales or promotional sales of some sort. By moving low sale velocity products from your inventory, you free up space and capital which you can reinvest in other more profitable areas of your business.
Personally audit your stock
One potentially useful tip in your inventory journey is to constantly audit your stock personally on a regularly basis. Even though you have an inventory software to streamline the inventory management of your eCommerce store and make operations easier to handle, you need to endeavor to conduct an actual, physical audit of your stock once in a while. This will let you know if what you think you have actually matches up with what you really have.
The time period between checks should depend on your discretion. It could be done annually with a year-end physical inventory count. But if your store deals with fast moving products, then auditing could be more frequent.
Also, you should endeavor to conduct spot checks: preferably, with products that are being brought in. There might be an error with your suppliers; they may bring you more or less products than you ordered. This will also help to detect theft or pilfering incidents you’re unaware of that may be draining you.
Performing regular checks and audits will also let you know if there are any broken or damaged goods in your inventory. Spotting these signals early will save you the embarrassment of accidentally shipping them out to clients. Regular audits will also alert you on time in case your suppliers are providing you with sub-standard goods, depending on the percentage of damaged goods you have.
Ensure quality control
A key inventory management tip that should guide eCommerce merchants is ensuring quality control. Quality control is simply the process by which merchants review the quality of all factors involved in production by testing a sample of the output against the specification.
You must apply this principle to ensure products from your suppliers are of the highest quality. This will also ensure that the products in your store also meet the highest standards — saving yourself the embarrassment of shipping off broken or expired goods to your customers. Constantly reviewing this process will also ensure all the products shipped out to clients look and work the way they’re supposed to.
To make the process easier, put together a checklist of all the common issues that a particular product might have. Armed with this checklist, assessing the potential damage of your products becomes easier, faster and more efficient. With a good quality control system in place, it is easier to assess the quality of products from suppliers as well as products going out — saving money and preserving your reputation.
Consider hiring a stock controller
Running all sectors of your business, even if it’s a small one, can be very tasking and exhausting. This is especially so if there are a lot of moving parts to the business. In such situations, keeping up with all the different sectors of the business will take too much of a toll on you.
It is therefore of essence that you free up some space by delegating some roles and hiring a stock controller to help you with your quality control efforts. A stock controller will help you keep track of the stock coming in and going out, more specifically taking care of all purchase orders and receiving deliveries. This person will also ensure that when products are brought in they get into the warehouse or storage space, making sure that they match up with the orders that have been placed.
Inventory management forms a core part of running an eCommerce business.Therefore, merchants need to know much of the tips that will make this part of running a business a fruitful exercise. Applying the above mentioned inventory management tips will set your business on a solid foundation and help you run your business rights. At this stage, if you haven't incorporated these inventory management tips into the running of your store, then it’s time to rethink.