How to Manage Inventory for a Small Business

how to manage inventory small business inventories management

Running a small business, no matter the industry, is not for the faint of heart. It takes a handful of people (sometimes less) to do the job of hundreds of people.

During the hustle and bustle of everyday demands, it can be hard to prioritize certain aspects of the business over others. Because of that, things such as inventory management fall to the wayside.

The truth is the companies that focus on and maintain proper inventory organizations reap the benefits of efficiency and safety.

Here are several tips on how to manage inventory and get you and your warehouse back into fighting shape!

1. First In, First Out

Some companies make the mistake of improperly stocking and restocking their inventory.

When they go to replenish the current inventory, they forget to make note of which products are the older set. Because of that, you have older inventory waiting in the back, never to be used.

In order to avoid this, experts recommend that companies hunker down on a first in, first out method. This means that all of the products are sold/used in the chronological order that they came in.

That helps you maintain a level of frequency and keep your products consistent. Your customers can always expect the items they purchase from you to be within a certain window.

One of the best practices for adopting this method is to stock all of your shelves from the back. Thus pushing all of the older inventory into the front where customers have access to it.

You can use this principle for warehouses, store shelves, commercial storage containers, or any other means of storage.

2. Toss the Unused Items

Everything has a shelf life, even if the item doesn't come with an expiration date. You know when it's time to move on from a product after years of gathering dust on the shelves.

If it's never going to be sold then that item (or those items) is taking up valuable space on your shelves or in your warehouse.

Now it's time to find someone who will use it for other reasons. Time to either throw away the old inventory or donate it. 

It's understandable that you wouldn't want to eat the price you paid for those items, but they're doing you more harm than good if they just sit there.

So... what does that timeframe look like? It's hard to say. It also depends on the type of products that you're storing and selling. 

However, if there's something you haven't sold in a year or haven't used in 7 months, then it's time to move on from those products. Although there are exceptions, this basic rule of thumb will get you moving on the right path.

3. Organized Inventory Information

So, you're putting all of this hard work and effort into reorganizing every detail and storage shelf in your warehouse. What's just as important is to find a way to keep track of all of it.

How will you keep proper files to reiterate the organization and the new storage system that you've integrated?

For instance, how will one of your workers know that the box of pre-packaged batteries is now on shelf 12A, instead of shelf 3B (where it used to be)?

Try using things such as a barcode system, box labeling, alphabetical order, etc. Then make sure you're keeping track of the new storage system as you go along. 

Remember, some inventory organization systems make more sense depending on the industry that you're in. 

For example, an auto parts store might find it better to organize their inventory by the product type. Contemplate what style is best for your situation, then jot down notes as you go.

4. Perform a Self-Audit

That's right, ladies and gentlemen... it's the word that all inventory managers are trained to fear: audit.

However, performing a self-audit can be a tremendous asset to your warehousing techniques. It shows the areas that need to be improved and helps you make plans to rectify those errors.

More importantly, it can help you see where the money is being wasted. This can help you save significant money by adjusting.

Start by assembling a self-audit task squad made up of your most trusted employees (one from each department). Have them dedicate a few hours or days (depending on your company size) to auditing the entire inventory.

The results will give you feedback on what needs to be improved, as well as what you're doing right.

5. Integrate Proper Inventory Management Software

Your new inventory management initiative is only as good as the new software that you integrate to support it.

Larger companies use them as a way of attaching and streamlining communication between inventory and sales. That helps prevent errors by the middle man. One best way to track automatically the movement of your inventory is by using SKU also known as Stock Keeping Unit, it is a scannable bar code, that can be seen printed on product labels in your retail store.

However, for your small business, you can also download helpful apps such as Sortly, SOS inventory, Delivrd, or On Shelf. These have all been given high praise for the assistance they've provided to small business owners without an inventory background.

How to Manage Inventory: Commit Yourself to the Craft!

Now that you have seen some of the major techniques with how to manage inventory like an expert, it is time to start your new inventory practices today.

As with anything else in business, this new system will take time. It won't just develop overnight. You will find that some things are easier to incorporate than others.

Be sure to read our other articles about inventory management, warehousing, and logistics.

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