Optimizing Inventory Management: The Key to Unlocking Business Growth and Profitability

May 24, 2023

Any business dealing with stock items needs to keep an accurate inventory of the stock in order to avoid overstocking or running out of stock items. In this essay, I'm going to discuss some tips on how to improve your inventory management.

Any business handling stock items needs to have an accurate inventory of their stock to avoid excessive stock or running out of stock items. In this essay, I will look at some tips on improving how you manage your inventory.

Nowadays, in this competitive business world, where technologies are advancing day by day, strategies are changing, and consumers' needs are changing with time, one of the most important factors that is missing is inventory management. Many small business companies are facing a problem of inventory, either they are stocking less items or they are stocking more items than their demand. Which is causing the problem for their cash flow, they might be running at losses or may be at the worst case they might be shutting their business.

Consequently, you need effective inventory management as the market dynamics will not wait for your business to follow its rhythm. True, inventory management is not rocket science. It is about having the right products on the right shelf, at the right time, in the right quantity, at the right costs, so that your business can meet its delivery obligations on time. This will help you to grow your business while protecting you from financial stress.

In this article, we will explore some of the most important inventory management techniques to improve your inventory flow, and provide some important tips to help better your approach. This advice will help you ensure your business quickly responds to the ever-changing market situations, while simultaneously optimizing operations and decreasing costs.

Tips how to improve your inventory management system

Better inventory management leads to happier customers and higher profits.

The tips that follow are simple and can help you with your specific inventory management improvement plan.

1. Prioritize your inventory

As a small business owner, you need to focus on your best-selling items and understand your ideal ordering quantities and frequency. This helps you categorize your inventory as per popularity and demand. Prioritizing ensures that popular products are always available while enabling efficient allocation of resources.

According to business experts, there are several ways you can classify your inventory, the ABC analysis being the most common one:

• A group: Items in the A group are higher-value items that account for a significant portion of the revenue. These items are not frequently bought; therefore, you need fewer of them.

• B group: The B group consists of items in between. In-between items are usually moderately priced items that are sold more slowly than C items but faster than A items.

• C group: Items in the C category are lower-cost items. Low-cost items normally refer to products with a low price point and sell quickly.

2. Track all product information

Maintaining a comprehensive record of product details within an inventory management system is one of the best ways to improve inventory management. It acts as a road map to smart decision-making and helps in accurate forecasts. The information that should be kept includes:

• Stock Keeping Units (SKU)
• Barcode data
• Supplier’s data such as name, location, type of products supplied
• Costs and pricing
• Sales history
• Countries of origin
• Lot numbers

These product details are essential in streamlining business operations. For example, keeping track of the cost of each item gives insight into the different factors influencing pricing, such as seasons like holiday periods. This information allows you to adjust prices and stock based on the market dynamics.

3. Conduct regular inventory audits

Conduct regular audits on your stock levels to identify discrepancies early, ensuring your inventory matches what is in the inventory software. Businesses might take inventory counts yearly or weekly, monthly, bi-annually or even daily for quick-selling products.

Ultimately, the purpose of any complete audit is to balance a physical inventory with the software records. To Follow Best Practices When Analyzing Inventory on a Balance Sheet, read this article.

4. Analyze supplier performance

Assessing your supplier’s performance is a crucial aspect of improving inventory management. Does your supplier deliver on time? Does your supplier deliver goods in good condition, or do you find yourself dealing with delays or damaged goods? It is important to ensure your suppliers can deliver inventory at the required time and in good condition.

An unreliable supplier can cause problems for your inventory, often resulting in customer frustration. When this happens, you need to have a sit down with your supplier(s) and have a discussion to figure out where the problem is and set clear expectations. If they are not showing signs of changing, you should switch suppliers before it is too late.

5. Embrace the 80/20 inventory rule

If your small business has just a few inventory items, you can use the 80/20 inventory rule – commonly known as the Pareto Principle – to improve inventory management. This principle says that 80 percent of your revenue or profit comes from 20 percent of your inventory.

Essentially, a small portion of your inventory is responsible for much of your business’s financial success. Therefore, you should prioritize the 20 percent of your stock. To manage this 20 percent, you need to understand their sales cycles and monitor them closely.

6. Standardize stock receiving

Creating a consistent process for receiving and storing stock is crucial to inventory management. A standardized process minimizes errors, enhances operational efficiency, and ensures your team is on the same page when handling inventory.

If you are not careful, errors during this activity may leave you with shortages that do not align with your numbers at the end of the year. Ensure all stock is verified when received, stored together, counted correctly, and cross-checked against the order given.

7. Track sales data

While it may seem obvious, monitor what’s moving off the shelves and what's not. Tracking your goods gives you a clear understanding of your inventory dynamics. This data helps you make informed adjustments to stock levels and understand customer preferences, ultimately enhancing your overall inventory management strategy.

8. Invest in inventory management technology

Invest in real-time inventory management software that automates tracking, ordering, and reporting. This investment reduces manual errors, enhances efficiency, and provides real-time insights into your inventory, a key aspect of any inventory management improvement plan.

Different kinds of inventory management technology like the barcode scanning apps, Inventory Management Software, POS (Point of Sale) Systems are available to make sure you don’t lose track.

For instance, Britecheck's mobile-based inventory management system with barcode scanner offers several benefits, including:

• Real-time visibility: A barcode scanner will allow you to keep tabs on stock levels in real time: you will always know what you have, and when you need to buy more.

• Data-driven decision-making: It helps you understand what's in stock. Once you’ve gathered the data, you can look for patterns and make better decisions – from predicting demand to optimizing stock levels.

• Reduced cost: A barcode scanner helps prevent overstocking and stock-outs alike, reducing waste and saving you money in the long term. Increased efficiency speeds up some processes, like stock counts and order fulfillment, saving your team time.

• Accurate tracking: You can track items from the time they enter your inventory to the time they reach the end consumer – and in doing so, you gain greater control over product recalls and expiration dates.

9. Back-Up Your Data

For example, a backup plays a key part in your inventory management system which ensures the safety of your critical inventory data such as the sales history and the inventory receipts.

If the primary system fails, a contingency plan will enable you to conduct business as usual as you are able to retrieve vital information in a short span of time, which, in turn, makes the entire inventory management system highly reliable.

Choose the best inventory management software for your business

One of the fastest ways to enhance your profits in the business is evolving your inventory management.To achieve this, it is crucial you come up with an idea on how to upgrade your inventory management system for your small business, and one of the best ways of doing this is by introducing inventory management software in your business.

The key to business efficiency depends on choosing the best inventory management software. Consider factors such as business type, scalability, and budget to make the right choice. Moreover, explore options that offer features like cloud backups and mobile accessibility.

Staying informed of the movement of items in your inventory is indispensable. Start your inventory management process with a specialized tool like Britecheck. It will help you to not only manage your stock but also to improve the flow of your business.

Sign up for Britecheck's exclusive Webinar and experience how you can improve your inventory management process through Britecheck Inventory Management Software.