Small businesses come across several challenges including financial and operational. Unless they have the right inventory management strategy, small businesses can find inventory management challenging. Keeping things organized is just as important for the small businesses as for the large enterprises. Inventory errors or inefficiencies can become a source of trouble for small business owners. It is why they must keep track of their inventory. By keeping track of the goods they have in store, small business owners can operate more efficiently and profitably. Apart from these things proper inventory management is also linked to customer satisfaction and whether a small business or a medium sized one, it must consider focusing on its inventory management strategy to see higher success.
Inventory management can save their time and money. For managing their inventory, businesses must record the products they have produced or purchased, shipped, delivered, and returned. The main goal of inventory management for small and medium sized businesses is smooth fulfilment apart from sufficient supply. They must be able to fulfil orders in time without a delay and have sufficient stock so they do not get overwhelmed with orders. Another important goal of inventory management is to minimize costs for the business and reduce losses. Having the right inventory management strategy will help small and medium sized business owners keep their business organized, increase the productivity and efficiency of their business while also minimizing losses as well as wastage of time or money. It will also help businesses in terms of maintaining accuracy. Overall, inventory management offers several advantages for small and medium sized businesses.
Inventory Management Strategy for Small and Medium Sized Businesses
What these businesses need to do is to follow a few important practices in terms of inventory management to achieve their desired goals and reduce inefficiencies.
Regularly count the inventory:
Business owners must regularly count their inventory. Tracking the stock is important not just for managing costs or smooth operations but in certain cases it will also help detect theft or loss. So, relying only on your POS systems or digital records is not enough for tracking inventory. Business managers must check out if the real stock levels match the records. For this purpose they must regularly complete inventory counts.
Set inventory levels:
PAR level is an inventory control system that businesses can use to properly manage inventory. PAR is an acronym for Periodic Automatic Replacement. Supply chain and inventory manage experts recommend the use of this inventory control system for smooth operations. PAR level tells the business owners what level of inventory they must have in stock to successfully fulfil demand. It also denotes the optimum level of inventory stock needed on hand after each order delivery. However, there are also many factors that can affect PAR levels. For example, this level can change by seasonality, in times of festivals, or even on certain days of the week like the weekends. The demand for certain goods can change with season or on the weekends. For the businesses dealing in perishable goods, it is important to set PAR levels. It helps them prevent wastage and reduce costs.
Find out slow moving goods:
There can be slow moving goods lying in your stock or items that are lying unsold for long. One important goal of inventory management is also to find out the products that are slow moving and clear them off. If you have such items lying in your stock, it might be time to stop stocking them. Several times businesses use discounts and other types of promotions to deal with slow moving goods. It helps clear off those items and then one can replace them with other items that are experiencing higher demand.
Use the first in first out approach:
There are two main inventory accounting methods which include LIFO and FIFO. LIFO means last in first out, while FIFO means First In first out. The use of LIFO in most cases is not ideal or very realistic since business would not like to have their older inventory lying idle in stock. In such a case, when they move their latest inventory first, the leftover inventory might become too old or obsolete which can lead to losses. So, the small and medium sized businesses must use the FIFO or First in and First Out approach which means moving the older inventory first. It will help you keep your inventory up to date. You must sell products in the order you bought or manufactured them. Another benefit is that using this approach you will not need to sell too old or expired products.
Use an inventory management tool:
At last, the small and medium sized businesses which are facing challenges related to inventory management must consider using an inventory management tool. While many times, businesses can manage without it, investing in an inventory management tool may help you overcome several tensions related to inventory management. It becomes particularly helpful when your inventory is more complex. It will not just streamline the tracking process but will also help you save time and grow the efficiency of your business. Depending on your type of business, the inventory management tool can be as simple as a spreadsheet or specialized software that are created to help businesses track their orders, sales, average order sizes and average daily shipments. Using inventory management software can help you automate the process of inventory management, accurately track your expenses and also improve your customer service.