From Disheveled to Organized: Practical Tips for Better Inventory Control
When you’re running an extremely small company with just a few orders coming in each day, inventory control isn’t something you have to think much about. You just do it. But when your company scales up and you begin receiving hundreds or thousands of orders a week, the need for a strategy quickly becomes apparent.
4 Inventory Control Tips You Need to Implement
Inventory control is something you probably don’t want to spend a lot of time thinking about. However, it’s one of those operational challenges that can make or break the long-term success and scalability of your business.
Here are some tips that will help you take a strategic, proactive approach to inventory control:
1. Identify Inventory Turnover Ratios
One of the very first things you have to do is identify inventory turnover ratios for different products. This is the time it takes for inventory to be used up, or turned over, in a given period. The higher the ratio, the shorter the shelf life. This means it moves quickly and needs to be replenished swiftly in order to maintain optimal profitability. The lower the ratio, the longer the shelf life.
2. Get Placement Right
Once you’ve identified the inventory turnover ratios for different products, you can begin to focus on placement in the warehouse. Place the fastest-moving products in close proximity to the shipping and receiving areas. On the other hand, you can place the slower-moving products further away. Place excess and/or obsolete stock as far away as possible.
Placement might seem like a small thing, but the time and energy you save will add up. You’ll find it leads to greater efficiency across the board.
3. Figure Out a Replenishment Strategy
Your inventory turnover ratios will also help you in another way. You’ll be able to come up with a plan for replenishing products in a manner that allows you to maximize profitability without overstocking your shelves.
“It is essential to have an efficient replenishment strategy that plans for new inventory to arrive just before your current supply runs out,” ACCEO ERP advises. “There are different approaches to help you achieving this goal.”
When you’re small and nimble, you might be able to handle replenishment manually. That is, you can do this by walking around the warehouse and making notes of inventory levels. Then you can place orders at the end of the day.
In contrast, when you’re larger, you will likely need Distribution Requirement Planning, or DRP. This method uses forecasts on demand. In other words, it works backward through the supply chain network. It lines up orders to minimize inventory without causing shortages.
RELATED ARTICLE: THE BASICS OF EFFICIENT INVENTORY MANAGEMENT
4. Keep Accurate Records
If you’re going to get serious about inventory control, you have to look beyond having an organized warehouse. You also need to be organized on the administrative front.
One of the key components to better inventory control is to have an efficient inventory tracking system that allows you to maintain accurate records. A meticulous record-keeping system helps you when there are inventory inconsistencies. And it’s also valuable when it comes to things like audits and taxes. It’s essentially an investment in practicality and peace of mind.
It’s Time to Get Organized
The longer you go without a formal inventory control strategy, the more likely it is that you’ll make a costly mistake. You could even end up in a compromising situation that holds you back.
The good news is that you can start developing an inventory control strategy today. Once you get the right building blocks in place, you can continue to optimize. Keep at it until you find a plan that really works for your needs and demands.
Are you ready to roll up your sleeves and figure it out?