Inventory management and operations is such an integral component of conducting a viable business. There are dozens of software options available to assist you in managing your inventory. So, which inventory management approach should you take to reap the best results?
Of course, this is entirely dependent on your business type and business objectives. We’ve accumulated a list of inventory management techniques that are fundamental to optimising your inventory.
5 EFFICIENT WAYS TO OPTIMISE INVENTORY MANAGEMENT
These methods are used to combat a slew of common errors found in traditional inventory management such as mis-shipments, lost stocks and overstocking. The incorporation of these inventory management techniques will save you a heap of time, money and resources.
1. CROSS-DOCKING
Cross-docking is a stock management tactic in which an incoming truck unloads materials directly into outbound trucks, resulting in a just-in-time shipping process. In between deliveries, there is little to no storage.
Benefits of cross-docking includes:
- Increased efficiency
Material handling at the cross docking terminal will be standardised, greatly improving efficiency.
- Lower costs
Packaging costs will be reduced as a result of automation at the cross-docking terminal.
- Easy screening
With the use of streamline and automation at the terminals, products will be screened more efficiently, potentially reducing the time parcels spend in shipment.
2. FORECASTING DEMANDS
Accurately forecasting demands is no easy feat, and not something new either. These days, a multitude of technological advancements (hello AI!) allow retail giants to more accurately predict their inventory needs.
For those of us operating on a smaller scale however, forecasting demands that we base our decisions on statistical data and market trends to generate better approximations. Here’s how accurately forecasting demands will benefit your business:
- Efficiently meeting customers’ demands
When you have stocks available ahead of time, you’ll be able to reduce customer waiting time.
- Build a better relationship with suppliers
As you build a long-term relationship with suppliers, they’re more likely to prioritise your needs.
- Stay ahead of competitors
Being able to foresee what consumers need and want ahead of time requires sharp data analysis and timely forecasting, but will no doubt put you one step ahead.
3. ABC ANALYSIS
This inventory categorization method takes products into three or more categories in order to identify how each item benefits the business. Category A could indicate items that are the most profitable, Category B could indicate items that are moderately valuable and Category C could indicate items that garner the least transactions. Benefits of ABC analysis include:
- Determine marketing budget
By establishing which items are the most or least valuable, you’ll be able to confidently determine which products need greater marketing effort.
- Determine customers’ purchasing behaviours
Establishing the value of each product in its respective category allows you to form a greater understanding towards your customers’ purchasing tendencies.
4. BATCH TRACKING
Batch tracking is a quality assurance inventory management technique that allows you to group and track a set of stock with similar characteristics. This method is useful for tracking inventory expiration or tracing defective items back to their original batch. Benefits of batch tracking include:
- Efficiently resolving faulty items
If you encounter a number of faulty items, this will be an efficient way to resolve the issue.
- Efficiently answer customers’ inquiries
When customers ask about the status of multiple orders, you will be able to give a quick and accurate answer.
5. CONSIGNMENT INVENTORY
A consigner is a vendor or wholesaler who consents to sell their goods to a retailer, without the retailer paying for the goods beforehand. The consigner retains ownership of the goods, and pays for them only when they are sold. Benefits of consignment inventory include:
- Quick restocks
It’s in both the supplier’s and the retailer’s favour to keep the shop stocked, so inventory is usually replaced immediately as it sells.
- Lower costs
The retailer doesn’t have to pay for the goods until it is sold, which improves cash flow as it eliminates the cost of supplies.
- Safely test the waters with new products
Before heavily investing in an unsubstantiated product, you can test it in a new sales channel to determine how to best position it in your business.
In order to save and generate more money for your business, you must safeguard and nurture your existing resources into the right direction through an effective inventory management system. If you feel stuck in a rut, put the following tips above into action to improve the landscape of your business.
If you need more insight on how to improve your business model, our retail training programs might do just the trick. From customer service to leadership, there’s no end to improvement!
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