Inventory management is one of the critical elements of supply chain management. It systematically monitors commodities and stock levels, including raw resources and consumer goods deliveries.
Efficient inventory management is the foundation for a well-run business. It is a great way to improve business longevity since it enables companies to reduce expenses, enhance cash flow, and increase profitability.
The remainder of your distribution network will come together once your inventory is structured appropriately. Moreover, you can avoid consequential errors like incorrect shipments, out-of-stock, shortages, spoiled goods, surplus inventory, and dead stocks.
Top 10 Inventory Management Strategies and Techniques in 2022
The brilliance of e-commerce supply chain and inventory management liberates you from having to tally your stock and guarantees that you will never unintentionally have a surplus inventory and dead stock. Additionally, it enables you to monitor crucial inventory KPIs to accomplish your business goals.
With several inventory management strategies available, it is important to opt for ones that best serve the demands of your business and work best for your inventory.
Some of the most effective and successful inventory management tips and strategies are as follows:
1. ABC Analysis
A well-organized inventory is key to effective inventory management. You can better identify the volume and frequency of items you may require and the importance of certain goods to your company’s operations with the help of Square Inventory Management.
You can enhance your stock management by classifying your inventory into priority groups such as A, B, and C. You can efficiently categorize your items, with each group representing specific characteristics- ranging from A group, which indicates relatively expensive items, B representing reasonably good items, and C displaying inexpensive items with a high turnover.
2. Average Cost of Items – AVCO
Tracking and recording all the product details for the articles available in your stock is part of AVCO’s process. Barcodes-originated countries, SKUs, lot numbers, and suppliers should all be included in your records. Consider keeping track of the cost of each product over time with Oracle NetSuite to increase your awareness of elements such as seasonality and scarcity that could affect the price.
3. Contingency Planning
Some businesses conduct a thorough survey at least twice yearly, while others perform spot inspections on their most sold products monthly, weekly, or even daily. On the other hand, many businesses engage in both. No matter how thoroughly or frequently you examine your inventory, make a conscious effort to regularly assess your inventory count with correspondence to your perceived stock levels to prepare yourself for the future in case of any errors.
4. Cycle Counts
Hence, taking that into account, you must prioritize the management of those 20% commodities. You should be well aware of these products’ entire sales lifetime, including the number of items you sell weekly or monthly. Make sure you manage these efficiently because they are the goods that bring you the most value.
5. FIFO and LIFO
The procedures of Last-in, First-out (LIFO) and First-in, First-out (FIFO) can be used to estimate the price of products sold. LIFO prevents stock from becoming outdated, while FIFO is an excellent approach to keeping inventories current. FIFO prioritizes every last article of a stockpile to be distributed first for new units to arrive, and LIFO encourages fresh inventory.
Although each method has benefits, LIFO is only sometimes feasible for all businesses (because some would prefer not to have their older product sitting around in stock). Because FIFO ensures that the oldest commodities leave the warehouse before everything else, it is employed more frequently.
6. Safety Stock Inventory Management
Using safety stock, additional inventory is acquired over what is anticipated to be needed in an effort to avoid stock-outs brought by faulty forecasting or unanticipated changes. Safety stock is an insurance plan that guards businesses against unforeseen changes in demand, supply, or production yield.
Use one of our highly ranked inventory management software, BigCommerce Essentials, to avoid any stockouts in the near future.
Ordering additional inventory and putting it aside in case you don’t have par levels is crucial for effective inventory management. This lessens the likelihood of stock-outs or surplus inventory.
7. Consignment Inventory
You must have heard the term’ consignment inventory’ repeatedly in your neighborhood consignment shops. It is when wholesalers or vendors agree to deliver their goods to a consignee (retailer) even without any consignee making an upfront payment for the stock. The products are still owned by the consignor supplying the inventory, and the consignee only pays for the goods once they are sold.
8. Just-in-Time Inventory Management
With JIT or Just-in-Time inventory management, businesses can place supplier orders for raw materials in sync with their development cycles. Since new items are shipped to companies only when they are actually needed, using the JIT approach is a terrific way to cut expenses and avoid ordering excess inventory.
Dropshipping is a type of order fulfillment where the provider sends the customer’s order directly from the supplier. Instead of selecting the product from your internal stock, you can buy it from a private entity and ship it to the customer.
10. KPI Analysis
With respect to inventory management, KPIs or key performance indicators are measures that support stock monitoring and decision-making.
KPIs for inventory management aid in analyzing and monitoring the effectiveness of operations, including ordering, managing, and turning stock. They have the ability to gauge the success of supply chain goals and pinpoint potential improvement areas.
Integrate an Inventory Management Software to Manage the Ins-and-Outs of Your Business
An efficient and scalable inventory plays a huge role in the success of a business. And with IT making everything easier and more productive, decision-makers are integrating automated systems to enhance their inventory management techniques.
Cloud-based inventory management software such as Oracle NetSuite, BigCommerce Essentials, and Square are ideal recommendations for organizations since they feature automated replenishment, tracking across multiple channels, and lot tracing – taking your inventory tracking up a notch.
So use the best suitable inventory management software for your business now and transform along with the technological evolution.