Have you ever thought about how grocery shopping is a form of inventory management? Think about it — you probably visit the store often to restock your home with fresh produce. While uneaten snacks are often shifted to the back of the pantry to make room for this week’s grocery haul, you also keep an eye out for perishables, as food like berries and bread tend to spoil rather fast.
Now consider what would happen if you didn’t fill up your fridge and pantry. Most likely, you would be unable to meal prep for the week, leaving you with nothing other than expensive and unhealthy take-out food.
Similar to how grocery shopping is an essential part of running a household, inventory management is necessary if you want to maintain an efficient and profitable business. This goes for companies both big and small, as an organized inventory system can lead to smoother operations and bigger sales.
In this article, we will explore the absolute necessity of inventory management and provide essential tips on how to properly run things, focusing specifically on the role of inventory lists.
What is inventory management?
Let’s get started! When you hear the words ‘inventory management,’ you likely picture the flow of goods in and out of your business. Companies will often engage in activities such as monitoring stock levels, recording inventory movements, and verifying that products are readily available when customers need them. While these tasks typically keep customers satisfied by guaranteeing timely delivery of orders, they also help you get rid of excess inventory, which will free up more storage space in your warehouses.
Ultimately, the goal is to have everything in your organization running smoothly, so you can focus on becoming your customer’s favorite brand to splurge on!
The main benefits
If your company is looking to perfect the art of inventory management, read on to learn about the possible benefits:
- Keep an optimal stock level: Enough products are available to meet customer demand without incurring excessive carrying costs.
- Example: A manufacturing firm that produces electronic devices can use inventory management techniques to determine the right quantity of components and finished products to have on hand. Accurately forecasting demand and adjusting inventory levels accordingly helps with delivering customer orders on time and maintaining a reasonable level of stock.
- Reduce the risk of stockouts: When companies keep their products in stock and can fulfill customer orders on time, this increases brand loyalty as well as the likelihood of repeat purchases.
- Example: A grocery store decides to implement efficient inventory management practices by closely monitoring stock levels and replenishing items before they run out. Because customers always find what they need when shopping, they will be forever satisfied and keep on returning to their favorite store.
- Improve order accuracy: Implementing barcode scanning systems, automated inventory tracking, and regular audits can decrease the number of incorrect shipments and prevent your customers from unleashing their wrath in the form of a bad review.
- Example: An online retailer begins investing in advanced inventory management technology. It aims to accurately track inventory levels and confirm that the right products are being shipped to the right customers. This boosts customer satisfaction and their perception of the company, as they will have to deal with fewer returns or exchanges.
Introducing inventory lists
While proper inventory management contributes to a successful business, an effective inventory list serves as the main reference point for all things tracking and managing. A comprehensive document that provides a detailed overview of a business’s inventory, the inventory list is a valuable resource for those seeking to keep track of their inventory and maintain optimal stock levels at all times.
While the length and complexity of an inventory list depend on how large the organization is, each list generally includes information about item descriptions, SKU (stock-keeping unit) or product codes, quantities, storage locations, and unit costs.
The key components
When creating an inventory list, the following key elements should be included to guarantee its effectiveness:
- Item descriptions: A clear and concise description of each item in the inventory is essential for easy identification and categorization. Imagine how frustrated you would be if you went to the grocery store and found all the produce jumbled together without labels!
- SKU or product codes: Assign unique codes to each item to streamline the inventory management process and minimize the chances of errors. Cashiers can scan these codes and look them up on their screens if there are ever disputes with the customer.
- Quantities on hand: Know the exact quantity of each item in stock at all times. This number helps you decide when would be a good time to reorder each product.
- Storage locations: Identify the specific storage location of each item in your warehouse. It makes it easier to locate and retrieve items when needed.
- Unit costs: Record the cost of each item to calculate the value of your inventory. You can also use this number to offer competitive prices to your client base.
- Additional information: Depending on your company’s specific needs, supplemental information (e.g., supplier details, expiration dates, or product specifications) may be included in the inventory list.
Tips for effective inventory management
Now that you have a good understanding of inventory lists and how they affect inventory management, let’s discuss some strategies for effectively managing your inventory.
Implement a reliable tracking system
Here are two ways to track inventory movement in real time: barcoding and radio frequency identification (RFID) technology. These methods eliminate the need for manual data entry and reduce the risk of errors. If there are any discrepancies or issues, your system can catch them right away.
- Barcoding: Each product in your inventory is assigned a unique barcode. When the item is received, sold, or moved, a barcode scanner will scan it. Then, the information automatically updates in the inventory management system.
- RFID technology: Radio waves are used to identify and track items with RFID tags. These tags can be attached to individual products or pallets so that you can quickly and accurately count them.
Regularly update your inventory lists
Your inventory lists need to be updated to reflect accuracy. Just consider how your customers would feel if they placed an online order that was deemed unavailable several days later because of inventory issues. If they’re angry enough, they’ll stop buying from your business. Below are two strategies to avoid this:
- Perform physical inventory counts: Count every item in your inventory and compare that amount to what was recorded in your inventory management system. If errors arise because of missing or misplaced items, this is a simple fix.
- Review and revise inventory lists often: Whenever an item is received, sold, or moved within your business, it’s time to update your inventory list. This can be done manually or via inventory management software.
Use inventory management software
Technology tends to simplify our lives and make them run a lot smoother. Inventory management software is no different, as this handy tool can optimize your inventory levels, lower carrying costs, and improve overall operational efficiency. Here are two key benefits:
- Automate manual tasks: A software solution can automatically update inventory records when items are received or sold, generate reports on inventory levels and stock movement, and provide insights into trends and patterns that can help with forecasting and planning.
- Integrate with other business systems: Merging with point-of-sale systems and accounting software allows for seamless data flow and gets rid of the need for manual data entry and reconciliation.
How to approach issues related to inventory management
It’s not always smooth sailing when your organization is working toward implementing effective inventory management practices. There are several challenges that businesses seem to run into, time and time again. Let’s go over them, along with several strategies to overcome them.
Issues with overstock and stockouts
An overstocked inventory can tie up capital and increase carrying costs, while stockouts can lead to lost sales opportunities and dissatisfied customers.
Solutions:
- Conduct regular demand forecasting and analysis to determine optimal reorder points and quantities. At all times, your business should have enough inventory to meet customer needs. This is especially important during peak seasons, like Christmas time.
- Analyze historical sales data to pinpoint patterns and trends in customer demand. When you replenish your inventory, your orders must be made systematically. If you approach the process at random, you can end up ordering too much or too little.
Unreliable suppliers
If you don’t have a good relationship with your suppliers, you may not be able to get a hold of your products in time to ship them off to your customers.
Solutions:
- Be on good terms with your suppliers by respecting their time and communicating well. Share your demand forecasts and inventory requirements so that your suppliers know ahead of time what exactly you need from them. After all, nobody likes being called to do last-minute work — certainly not during the holidays.
- Incorporate just-in-time inventory practices, where you receive inventory from suppliers just in time for production or customer orders. This frees up your warehouse storage and saves your company money. Remember, you need to coordinate properly with your suppliers and logistics team so everything arrives on time. Make sure everybody is available to work with you when you need them.
- Have a list of backup suppliers to combat changes in the market or in case your main supplier is on vacation. If your current supplier is unresponsive, doesn’t deliver on time, or has consistent issues with product quality, consider switching suppliers altogether.
Future trends
The field of inventory management is continually evolving, driven by advancements in technology and changing consumer behaviors. Let’s take a look at how the future will be different!
- Advancements in automation, data analytics, and cloud computing are revolutionizing the way businesses track, manage, and optimize their inventory.
- IoT sensors, automated inventory replenishment systems, and real-time data analytics simplify the decision-making process and give your organization a much-needed boost in terms of operational efficiency.
- Artificial intelligence (AI) and machine learning (ML) assist with optimizing inventory levels and supply chain operations. They also keep your customers happy.
- Use these tools to analyze vast amounts of data, identify patterns, and predict future demand for your products with greater accuracy. Instead of always looking at the past, look forward to the future!
Use Wrike to boost your inventory management
Effective inventory management is a must-have when it comes to maintaining business efficiency and preventing costly errors. With Wrike, you can manage your inventory lists seamlessly, ensuring accurate tracking and optimal resource allocation.
Stop by to see what Wrike has to offer in terms of engaging features. Enjoy the benefits of using our:
- Automation features to efficiently manage your inventory
- Powerful AI to spot patterns and suggest inventory levels based on previous orders
- Kanban boards to track different stages of inventory, e.g., ‘Ordered’
If you want to stay organized and stop losing money because of inventory management errors, you’re in good hands. Start your free trial of Wrike today.
Note: This article was created with the assistance of an AI engine. It has been reviewed and revised by our team of experts to ensure accuracy and quality.
