How To Keep Track of Inventory

Inventory tracking is the strategic monitoring of a company’s stock levels, orders, sales, and deliveries. An efficient inventory management system ensures that you always have the right products in the right quantity for sale at the right time. This helps to prevent stockouts, lower the expenses related to excess inventory, and ensure that capital is not tied up needlessly. 

Businesses use various methods to manage inventory, from manual tracking to sophisticated systems. One of the most effective modern methods is inventory management software. This article will walk you through the various steps involved in managing inventory effectively to improve business productivity. 

Best Inventory Management Software

• BigCommerce: Easily manage your inventory
• NetSuite: Access real-time inventory data
• SquareUp: Inventory management you can count on

How To Manage Your Inventory

Managing your inventory is a multi-step process that requires careful planning and execution. It covers everything from assessing current inventory to implementing a stock control system, monitoring and adjusting inventory levels, conducting regular audits, and analyzing inventory management practices.

Step 1: Assess Current Inventory

An accurate assessment forms the base level for all subsequent inventory-related decisions. If you’re using a periodic inventory system, then you manually count each item. Businesses that use a perpetual inventory system, like inventory management software, can generate a report that provides up-to-date information on current inventory levels. A POS system is highly recommended as it provides real-time data and reduces the chances of errors.

Step 2: Utilize Inventory Management Software Reports 

Use your software system’s reports to assess product performance and inventory turnover. Identify patterns within your inventory, such as fast-moving items, slow-moving items, and any discrepancies that may require attention.

Step 3: Set Inventory Goals

Determine the optimal stock levels by considering sales trends, demand forecasting, and historical data. Afterward, establish reorder points and safety stock levels to prevent stockouts and overstocking. Remember that high-demand items will have a higher reorder point while slow-selling items will have a lower one.

Step 4: Use Analytics for Demand Forecasting

The analytics feature of your inventory management software is useful for gaining insights into sales trends and customer buying patterns. Use the trend data to forecast product demands and adjust your inventory goals accordingly.

Step 5: Choose a Tracking Method

You can choose between manual and automated systems, depending on the scale and complexity of your inventory.

Manual systems involve spreadsheets or physically counting stock levels. While they are less efficient and more prone to human error, they are suitable for small businesses with limited inventory. 

Automated inventory tracking systems use technology to monitor stock levels in real-time. These software reduce the likelihood of errors, save time, and provide valuable insights into your inventory. If managing your inventory takes more time than managing your sales and employees, it’s time to automate.

When choosing an inventory management software, consider features like inventory tracking, reporting capabilities, ease of use, support, and scalability. It’s also important to ensure your chosen software integrates with other core tools, such as your accounting software, eCommerce platforms, and CRM system.

Step 6: Implement Inventory Tracking

Properly configured inventory tracking equipment, such as barcode scanners, QR code scanners, and RFID scanners, can significantly reduce the manual effort involved in inventory tracking. Follow these steps to set up your inventory tracking system:

1. Install the software: Follow the instructions to install your inventory management system on all relevant devices. Launch the software and log in with your credentials.
2. Customize Settings: Configure the settings to match your business requirements, such as setting up tax rates, payment options, user permissions, etc.
3. Create Product Categories: Organize your inventory by creating categories for each product. Create detailed descriptions for each item, including price and quantities, and list all variants like brand, style, color, size, and material.
4. Configure your inventory settings, such as reorder points and minimum stock levels.
5. Set inventory alerts and automation: Configure alerts for low stock levels and automation to update inventory levels as sales occur or new stock is added.
6. Upload Inventory Data: Enter product details manually using the POS interface or import a CSV file for bulk uploads if your POS system supports it.
7. Conduct an initial stock count and a few test transactions before going live with the system.

Step 7: Train Staff On The System

Training staff to be comfortable using the inventory management software is the only way to maximize its capabilities and minimize errors. 

1. Start by providing an overview of the system, explaining its importance in inventory management and how it fits into your overall business operations. 
2. Highlight the key features relevant to each employee’s role.
3. Conduct hands-on training sessions where employees interact directly with the inventory management system. Use role-specific training for each employee.
4. Set up a mock sales environment for employees to practice. With time, you encourage practice with real transactions to build staff confidence.
5. Create user manuals for employees to consult when they have questions, or set up channels where employees can seek assistance when they get stuck.
6. Schedule regular refresher courses to update staff on new features and best practices.

Step 8: Conduct Regular Audits

Inventory management is an ongoing process that requires consistent monitoring and adjustment. Regular audits of your inventory management system help you uncover discrepancies between recorded data and actual stock levels, minimize errors, and gain insights into areas for improving your inventory management practices. It’s also helpful in optimizing cash flow and detecting theft or loss.

The audit process begins with a thorough examination of your physical inventory compared to the figures reported in your software. You can perform the audit yourself or hire third-party professionals. 

Common methods used are:

1. Physical Audit: Conduct a comprehensive physical count of your inventory at least once a year. It is a tedious job, but it can be simplified using electronic scanners.
2. Cycle Counting: Divide your inventory into sections and count each section on a rotating schedule. Cycle counts are mostly done on high-value or high-turnover sections of inventory.
3. Spot Checks: Perform random counts of products periodically to identify errors in stocking, ordering, storage, or to detect theft.

Compare inventory numbers from your physical counts to reports from your POS system and your financial records. Discrepancies between your inventory numbers and financial statements may indicate issues that need further investigation.

Step 9: Analyze Data 

Inventory management software provides a rich data source that, when analyzed, can reveal trends in sales, inventory turnover, and customer preferences. They offer user-friendly dashboards displaying key inventory management metrics and KPIs, enabling you to make informed, data-driven decisions.

1. Utilize inventory reports to identify trends in product sales, seasonal fluctuations, and fast-moving items.
2. Analyze customer buying patterns to predict future sales and adjust inventory accordingly.
3. Optimize stock levels by adjusting reorder points and balancing your inventory mix. Focus on high-demand items and reduce slow-moving inventory to free up space and resources.
4. Leverage predictive analysis from your software to forecast sales velocity, future demand, and lead times. This helps you plan purchases proactively.
5. Use the inventory management system’s automation features to streamline procurement, i.e., trigger reorders when products reach their reorder points.
6. Evaluate suppliers using the data from your POS system. Consider their delivery times, product quality, and responsiveness. This information can help you select the best vendors and negotiate better terms.

Step 10: Optimize Processes

You can continuously improve your inventory management strategies for better productivity with the following steps.

1. Refine inventory management strategies based on the data generated by your POS system. Look for patterns, trends, and areas for improvement.
2. Streamline workflows for improved efficiency by automating routine inventory tasks such as reordering and stock level alerts.
3. Use barcode scanning for quick inventory updates and accurate tracking
4. Integrate POS with other systems, like CRM and accounting software, to centralize data and processes
5. Use technology-driven solutions, such as mobile inventory management devices, to increase accessibility and reduce time spent on inventory management

Step 11: Adapt and Improve

Finally, you must keep a pulse on market trends so your inventory management remains proactive. Your business can only maintain a competitive edge by staying flexible and responsive. Ensure you monitor market trends and embrace new technologies that enhance inventory management, such as AI and machine learning. 

Be prepared to pivot, whether it means shifting inventory for emerging products or scaling back on declining ones. Use feedback from your employees, customers, and suppliers to improve your inventory management strategies.

What Are the Benefits of Inventory Tracking?

Improved Accuracy and Inventory Visibility

Inventory tracking systems drastically reduce the errors associated with manual stock management. For example, a retail clothing store introduced a barcode scanning system to accurately track sizes and styles. This sped up their checkout process and reduced stock count mismatches by 90%.

Better Customer Retention

Businesses must avoid stockouts of popular items to increase profits and retain customers. Inventory tracking ensures that in-demand products are always available, leading to customer satisfaction and retention.

Case Study: An online bookstore used inventory tracking to monitor best-selling titles. They were able to closely monitor stock levels and reorder books before they ran out, resulting in a 20% increase in repeat customer orders.

Cost Reduction

Maintaining the right amount of inventory minimizes costs related to excess stock and storage. It also helps to identify products nearing expiration that need to be sold promptly. For example, a supermarket can save hundreds of dollars by properly tracking perishable goods like vegetables, and selling them off before they expire.

Streamlined Operations

Automated inventory tracking saves time and effort. You spend less time handling stock and more time focusing on customers and sales. For example, a grocery store chain could implement an inventory management system that automatically reorders items when stock levels drop below a certain point. It saves them valuable time and ensures shelves are always stocked. 

Enhanced Planning and Decision-Making

Inventory tracking provides real-time insights into stock levels, sales trends, and product performance. This information helps you make informed decisions regarding purchasing, pricing, and promotions.

Case Study: A small electronics retailer used inventory tracking data to identify consistently underperforming products. They decided to discontinue these items and focus resources on more popular products, leading to a 15% increase in overall sales.

What Are The Benefits of Inventory Management Systems?

Inventory management software pack extensive features that simplify the inventory management process. Here are some benefits your business gains from using such systems:

• Real-Time Tracking: Inventory management systems provide instant data on stock levels, sales, and customer preferences, 
• Enhanced decision-making: With detailed reports and analytics, you can make data-driven decisions and properly optimize your stock.
• Time-saving: Automating processes like end-to-end production, business management, demand forecasting, and accounting allows you to focus on your core competencies.
• Improved Accuracy: Inventory management systems reduce the chances of human error, leading to more accurate inventory records.
• Integrated Operations: POS systems can integrate with other software systems, simplifying operations and providing a unified view of business performance.

Tips & Best Practices for Inventory Management

Inventory management is all about improving stock inventory accuracy and operational efficiency. Many businesses lose revenue due to poorly managed stock or inefficient management systems. Here are ten powerful tips on the best way to track inventory.

1. Categorize your inventory

Grouping inventory into priority categories such as A, B, and C can be beneficial. These classifications help you identify your most important products and the ideal quantities and frequencies for ordering them.

• A group: They are high-value items that constitute a small percentage of your inventory. They require fewer quantities but need careful management.
• B group: These products sell faster than A items but slower than C items. They represent a middle ground in terms of value and turnover rate.
• C group: They are low-cost items that turnover quickly and make up the largest percentage of your inventory.

2. Leverage Inventory Management Technology

Investing in top-tier cloud-based inventory management systems like Epicor, SquareUP, Oracle NetSuite, or Zoho can provide real-time sales analytics and streamline inventory management. As your business grows, manual methods become more time-consuming and prone to errors.

A robust system can track products, generate inventory reports, forecast demand, and provide analytics. This significantly reduces stress and inaccuracies in managing stock. With sales apps and mobile technology, you can monitor key business processes from anywhere.

3. Utilize POS Systems for Comprehensive Product Tracking

Ensure that your POS system keeps detailed product information for all inventory items, including SKUs, barcode data, and supplier details. You can configure your systems to automatically update with each sale and set up daily stock alert notifications. 

4. Refine your Forecasting Techniques

Don’t leave your inventory management to whims and random events. Base your projected sales calculations on factors such as historical sales data, market trends, predicted growth, and the impact of your marketing efforts. You need this information to set optimal safety stock levels.

5. Conduct Regular Inventory Audits

Even with advanced inventory management software, you should periodically count your physical inventory to verify its accuracy against your records. Barcode scanning makes your auditing process quicker and more accurate.

6. Implement the FIFO Method

Adopt the FIFO (first in, first out) approach for inventory management, where goods are sold in the same order as they were acquired. Businesses that deal with perishable goods or other low-shelf-life products will find this method very useful. 

7. Analyze Sales Data

Effective sales tracking involves more than just tallying daily revenue. It’s important to understand what items were sold and in what quantities. Identify slow-moving stock; if an item hasn’t sold in recent months, consider discontinuing it. Pay attention to items that are frequently purchased together or during specific seasons. POS systems make it easier to track sales data, identify trends, and adjust inventory levels to meet demand.

8. Use Effective Quality control Measures 

During audits, inspect goods to check for signs of damage and accurate product labeling. You can assign this task to a dedicated stock controller to ensure your products are always in the best condition.

9. Integrate Systems for Seamless Operations

Whenever possible, use inventory management tools that integrate with your other business solutions. The best POS systems should work seamlessly with other inventory and financial tools in your business.  

10. Prioritize Supplier Management

Mitigate supply chain risks by managing supplier relationships effectively. Building positive relationships with your key suppliers can ensure a reliable supply and competitive pricing. Be prepared to switch suppliers if necessary to avoid inventory problems caused by unreliable partners.

Conclusion

As business operations, market demands, and technology evolve, so too must inventory management practices. While manual processes may suffice for a small number of orders, you need to improve accuracy and efficiency as your business grows. This is where inventory management systems come into play. By integrating sales and inventory data, these software provide real-time insights into stock levels and sales trends, streamlining operations and enabling informed purchasing decisions.

Businesses should adopt inventory best practices from the outset to build a reliable foundation for long-term success. You can implement the inventory management methods discussed in this article to stay ahead and meet the evolving needs of your market.

FAQ

Q: What is inventory management, and why is it important?

A: Inventory management is the systematic process of ordering, storing, utilizing, and selling a company’s inventory. It maps the complete journey of inventories from raw materials to finished products reaching the consumer. Inventory management is essential to maintain optimal stock levels, ensure timely order fulfillment, and maximize profits.

Q: Is inventory management software expensive?

A: Inventory management software comes at various prices, but small businesses can find many reasonably priced solutions. Many providers also offer free trials, allowing you to test the software before making a commitment. Consider features such as inventory tracking, reporting capabilities, ease of use, and integration with other systems before choosing inventory management software. 

Q: How can a Point of Sale (POS) system improve inventory management?

A: A Point of Sale (POS) system provides real-time insights into inventory levels and sales trends. It streamlines operations through automation, saves time, improves inventory accuracy, and helps businesses make informed decisions.