You’ve probably had that dream. The one where all your hard work has finally paid off and the orders for your product have started streaming in. You and your small team are celebrating. Suddenly, you can see the future…your business has moved from surviving to thriving. Maybe you see a new office, there’s a fancy nameplate on your door. You know, successful business stuff.
Only wait a minute—a member of your staff runs up to you, saying you don’t have the capacity to take on this many orders. It turns out you miscalculated and your business is completely out of stock of your star product. You realize it’s impossible to meet the demand you’ve spent years trying to create.
Or the inverse of this: you overestimated your market’s interest in a product that didn’t end up taking off. You ordered way too much stock, and now nobody’s buying. Now your business’s crucial operating funds are tied up in inventory and you don’t have a plan to recoup the funds. Your dream of building a business that’s the envy of the world turns to dust. Yikes.
Thankfully, we wake up after a bad dream. But how do we avoid these nightmarish scenarios in real life?
The answer is inventory management. Now, everyone from your neighbor peddling bracelets on Etsy to the tire shop on the corner to Wal-Mart is using some sort of inventory management software or system. But the difference between Betty’s Beadworks and Amazon is monumental—and you can guess which one of them is doing a supreme job of managing their inventory.
The first mistake a lot of small businesses make is thinking they’ll get proper processes in place once they really need to. I already know what you’re thinking: “Amazon has the best inventory management because of how big they are! They have next to unlimited resources.” Sure they do—but they didn’t get there by being disorganized.
In this article, we’ll be going over some of the best practices that exist for SMEs, and how these can help take your business from the bedroom to the garage, and beyond. We’ll also be talking about inventory management software and the major role it plays in helping establish order in an enterprise. Feel free to skip to the section of this guide that you feel most directly applies to you.
I’ve Never Really Managed My Inventory Before, How do I Get Started?
First things first: take stock of what you have and what you don’t. Perhaps even what you want and what you need. Ask yourself questions like: “What am I selling? How much of it will I sell?” And, “What do I want to keep selling? What products or services do I need to cut?”
Your ultimate goal in managing your inventory, whether you own your supply chain or are a part of something bigger, is to optimize levels of inventory so your business can operate seamlessly. Simply put, you do this just by keeping track. The more you start to take note of levels and trends within your product line, the more prepared you will be to tackle issues of supply and demand.
The Basics: 5 Best Practices Every Company Should Use (Including Yours)
- Count your stock! Even with software, double-checking to make sure what you think you have matches what you actually have is vital. This includes doing your due diligence when stock first comes through the door too.
- Abide by the “first-in, first-out” rule. This is why you see clearance sections in retail stores. Nobody wants to hang on to old stock forever, and some money for an old product is better than no money.
- Look for low-turnover items and when you find them: don’t order more. It can be tempting when you really believe in a product to hold on for the day the world sees it for what it really is, but when your customers flat out don’t want something that’s a different story. Your job is to give them what they want, and when you do, that’s how you make money.
- Remember quality assurance is important. Every so often, it’s good to check on your products and ensure they’re all working and looking like they’re supposed to.
- Last but (definitely) not least: forecasting demand is absolutely critical. Accurate sales predictions will go a long way in determining how prepared you are to handle fluctuations in volume or if (like in our dream scenario above) you’re over-preparing for something that likely isn’t going to happen.
Good Inventory Software Is Your Best Friend (and Makes Things Easier!)
Integrated inventory software can do so much more than you and a piece of paper (or even you and ten years of Excel experience) can do. The software can track what’s happening with your products in real-time, so you don’t need to tick boxes manually or try and keep track of everything in your head. The power of a good inventory management tool can do things like:
- Generate insights so you know what’s hot and what’s not with your customers
- Sync across all your sales channels (whether that’s through your point-of-sale, at a retail location, online, or sending invoices)
- Allow you to view your products from any device
- Send you alerts when you’re running low on something
When using inventory software, take advantage of the capabilities a tool like this offers you by recording detailed product information with each entry, such as: the wholesale cost, MSRP, your price, the SKU, shipping information (size, weight), and what category of products each item belongs to.