6 Inventory Management Best Practices for Small Business Owners
Around 25% of all inventory in small businesses is considered dead stock in the United States.
Inventory becomes unsellable when it gets damaged, satiated, or expired.
If you want to make the most of your inventory investments, there are a few tips to follow.
Continue reading to learn inventory management best practices that can save your company and bank account!
Train Your Staff
One of the most effective inventory management best practices is training staff.
When your staff knows how to handle inventory, it can prevent stock losses and waste. Untrained employees can misplace items, leading to them spoiling before they are found. This can also get frustrating if you think you’re out of a product and can’t sell it, but it’s hidden below something else.
You’ll want to develop a stock management team. You can train staff to manage inventory, this can relieve responsibilities on the owner. When too many people get involved with inventory, the risk of theft increases and become difficult to pinpoint.
Audit Your Inventory
If you’re worried about theft or can’t find where inventory is disappearing, you should conduct audits.
More people get anxious about audits but when you conduct internal ones, they aren’t as stressful. Instead of worrying about losing your licenses, you can focus on the small details that are leading to significant losses. Managing inventory will take time and you’ll want a reliable team by your side.
Each month, schedule your inventory team for an afternoon of inventory counting. If the inventory room is organized and items are properly put away, the process shouldn’t take long. Have your team work in pairs with one person scanning or saying the inventory while the other types the stock.
The best part about doing inventory audits is that it produces valuable information. You can better track the dead inventory and monitor what needs to be increased.
Practice FIFO
If you work in the food or beverage industry, the FIFO method is probably already general practice.
The first in, first out method involves getting rid of the inventory that has been on the shelves the longest. Rotating your inventory in this manner can prevent you from losing inventory due to expiration dates and damage. You must train your staff to stock inventory with this method and hold them accountable.
It helps when you have open or expiration dates to look at when determining what needs to go first. Outside of the food industry, other companies ship their older items to the customers, however, they aren’t expired. Practicing this inventory method can increase your profits but comes with a higher tax liability.
Evaluate your inventory and stocking process to see if you need to retrain staff or find a better way of monitoring dates. When you train your team, make sure they open boxes with small products to save time during peak hours.
Focus on Organizing
If you don’t have labels or a neat system for storing inventory, you are hurting your business.
Disorganization can lead to products going missing and not getting sold on the floor. Labels can help ease the frustration of organizing inventory since all staff can follow the directions. When they don’t know where to place items, the odd ones out will get misplaced or potentially damaged.
It’s best to keep like-items together. You can organize inventory in the most practical order for your business and services. Once all over the inventory has a section, including seasonal items, you can create an inventory sheet in the same order they got stored.
Track Moving Inventory
Whether you have inventory coming in or going out, it should always get documented.
Tracking your moving inventory will help you monitor where items are going missing. This is essential if you want to manage your investments and make the most of your money.
Many business owners use Inventory Management software to track inventory and invoices. This is a great way to see what’s happening with your inventory and you can pinpoint the problems. Some companies have resorted to cameras to prevent employees and customers from stealing.
Set a Par
Pars are simply predicted numbers of specific inventory that you should have on hand.
Depending on your company, your pars may fluctuate. Restaurants often deal with different par levels throughout the year because they use the produce that’s in season. When your employees have par numbers to compare stock to, you don’t have to worry so much about over and under-ordering.
You can develop a list of pars for each product your business orders. If your staff has a habit of ordering too much, pars will simplify the process. Instead of guessing how much you’ll need, you can subtract what you have on hand from the par.
Keep in mind that you’ll have to do some work to set pars and it may take time to get them right. You’ll have to adjust pars throughout the year and compare them with sales from previous years.
Do You Follow These Inventory Management Best Practices?
Following these inventory management best practices will save you money and time.
Instead of letting products go to waste because you can’t find them, all of the inventory will be in a systematic order. With a trained team by your side, you can reduce the risk of inaccurate orders and waste. Don’t wait to organize and streamline your inventory process.
It will take time to get into a flow and produce accurate par numbers for each season. Fortunately, with these tips and tools, you can get prepared and monitor movement.
If you want to learn more about preventing stock-outs and controlling inventory movement, read our blog for the latest info!