Inventory management is a skill that most small business owners develop over time, but it is one that is crucial to the short and long-term success of a business. While often overlooked as a business cost, inventory management can greatly affect costs through warehousing, storage, logistics, organization and through overstocking. Taking the time to approach your inventory logically, to eliminate waste and dead stock and to adopt best practices for small businesses will allow you to cut costs, save time, and increase your storage space and organization. This is especially important with small items like toys, which are frequently difficult to keep track of, especially in stores that sell online and offline.
These small business inventory management tips should get you started on the right track to an easy, efficient, and cost-saving inventory.
Adopt the Just in Time Inventory Module – Just in Time (JIT) inventory management requires that you understand your pipeline and logistics, your sales data, and your sales trends. Here, you calculate how much stock you need and order just enough to meet or barely exceed sales for every given sales cycle. You then set up reorder alerts for items when they reach a certain stock level, allowing you to restock just in time before you sell out. This module helps you to eliminate dead stock because it ensures that you only order small amounts of stock each time, reduce the amount of each item you have, and that you don't reorder an item until it reaches the reorder point.
How much could JIT save you? Experts suggest that the average small business maintains an inventory consisting of 20-30% dead stock. Dead stock will not likely sell, takes up space, and likely costs you money if you pay for warehousing, cycle count, or frequently have to move it around. By eliminating it and adopting an inventory management module that doesn’t allow for dead stock, you could save money, save time and free up valuable storage space for toys and gifts that will sell.
Integrate Cycle Counting – Cycle counting is the process of creating a cycle to count inventory, allowing you to manually check actual stock and compare it with listed stock every few days. In most cases, businesses successfully integrate this by dividing their inventory into sections, which are then counted on specific days. Fast moving stock should be counted more frequently to ensure accuracy. Ideally, you can also integrate electronic data interchange (EDI) and barcode scanning, and connect your Point of Sale (POS) to your inventory count.
Why? By ensuring that you maintain an accurate record of your stock, you prevent over or under ordering, preventing dead stock buildup and preventing lost sales and customers because of a sell-out.
The Pareto Principle– Everyone knows that some items make more money than others but not everyone bothers to keep track. You should. The 80/20 rule or the Pareto Principle is the idea that about 80% of your profit comes from 20% of your stock. While this rule won't be exact, it's close for many businesses, and you should be paying attention so that you can prioritize them. Once you know which products are making you the most money, you can give them better in-store placement, prioritize storage, and hopefully increase sales through better product prioritization.
Integrate Professional Inventory Management Software – While many small businesses try to use Excel or Google Drive spreadsheets to manage their inventory, spreadsheets are slow, difficult to manage, and easy to lose. Most accounting programs like Sage 50 and QuickBooks offer professional inventory management tools that you can use to create a safer inventory that is easier to update, search and utilize.
Back Up Your Data – While digital inventory management is time saving and often allows you to sync your data between your store and your warehouse or storage location, it also puts you at risk should the worst happen. If your inventory management program does not store data in the cloud, consider backing it up each time you update it, so that you have a copy in the cloud or on an external hard drive. Why is this important? A hard drive crash, a natural disaster, or even a spilled cup of coffee could mean hours of work and potential inventory disasters while you re-count your inventory and re-assign SKUs if you don't have a backup.
Great inventory management is great business, and you need it if you want to ensure that you are making the most of your storage and your stock. Hopefully you can use these tips to streamline your inventory management.