As a business owner, you know your inventory best. But managing your inventory well depends on you having the right tools and using the best practice to manage your stock. If inventory is one of your business’ most important assets, read on for five best practice online inventory management tips.
Choose the Right Inventory Management System
For most businesses, the best tool is usually perpetual inventory. Perpetual inventory control involves continuously updating inventory information - in other words, the database is updated after each transaction to reflect changing inventory quantity and availability. Perpetual inventory is usually considered best practice as it means businesses always have an up to date record of their stock on hand. Further, constantly recording data means that businesses can respond to emerging trends quicker and prepare forecasts using much more granular data. For very small businesses, a periodic inventory system can sometimes be appropriate. This is where inventory levels and availability are revised at the end of a given period, such as at month or quarter end. The advantage of periodic inventory is its initial simplicity - all that is required is a stock count at the end of each period. The advent of online inventory management has challenged the assumption that periodic inventory is the simplest solution for most early stage businesses; online inventory management is inexpensive, easy to deploy across multiple devices and can allow businesses to keep much more accurate records. Plus, many small businesses find that they can get by with less frequent stock takes using a perpetual system.Using the Right Software
In days gone by, many businesses opted for spreadsheets to keep track of inventory and accounts. Just as many businesses have seen the benefit of using specialised accounting software rather than spreadsheets, smart businesses understand that specialised software is the best way to handle inventory. Spreadsheets are error prone - sloppy formula drafting could mean that you overestimate stock on hand or order stock that you have no prospect of moving. Spreadsheets also lack accountability; there's no easy way to tell who has entered what information, making it difficult to spot dishonesty or poor quality work.Avoid Overstocking
Running out of stock can be catastrophic, but it's equally important to resist the impulse to carry large buffers of safety stock. Purchasing more stock than you need means tying up lots of capital - money that can't be invested elsewhere to grow your business. When you carry more inventory than you can easily clear, you raise the risk of damaged or lost stock, as well as stock obsolescence. And, of course, there is the cost of storing, insuring and handling all of the extra buffer stock. In short, overstocking is a crucial error to avoid.Manage Risk
Best practice in any business involves estimating risk and implementing the relevant controls. If a potential outcome could be fatal to your business, it pays to take steps to keep that risk in check. On the other hand, it makes less sense to invest heavily in preventing situations that don't have any real bearing on your business' success. Risk management in the inventory space often involves looking closely at your supply chain to identify weak points, and then carefully considering the likely outcome of a supply chain failure. If your business depends on a single point in a supply chain, consider finding an alternative supply or taking steps to mitigate risk.Innovate
As more businesses use online inventory management, manufacturing and procurement tools, businesses that stick to traditional ways of operating are likely to surrender their competitive advantage. Equally, businesses that innovate even further will be able to compete strongly - offering shorter lead times, more attractive pricing and unparalleled supply chain reliability. Tools like barcoding, RFID tags, customer specific pricing and integration with other platforms are likely to be the difference between average and high performing businesses over the next few years.