When it comes to inventory management best practices, there are a handful of tips and tricks that can help most businesses better manage inventory with fewer resources and in less time than ever before. In this article, we’ll zero in on six of these inventory management best practices, touching on everything from organizational methodologies to the importance of regular audits.
Here are seven best practices for inventory management:
1. Organize and store inventory properly
Regardless of what types of inventory your business keeps on hand (or at other storage locations), all inventory must be organized properly and stored in safe and secure conditions. This is especially important if your business stocks inventory prone to spoilage or shrinkage.
For example, many construction companies must maintain appropriate, climate-controlled storage space for raw materials such as wood and steel and secure, locked cages for high-value items like copper wire. This is also true for businesses that maintain assets—high-value items prone to damage or theft.
And even the simplest inventory should be properly labeled and organized. This is especially true for consumable inventory, which often has lots of different look-a-like variants that can be easily confused.
2. Select an inventory management system
While you organize your inventory, consider what type of inventory management system might be right for your business. Typically, companies choose between three different inventory management systems: manual, spreadsheet, and software. Typically, inventory management software is considered the best choice because it combines the simplicity of a spreadsheet with the automation features that make perpetual inventory management possible, including barcode and QR code scanning.
Sortly is an easy, flexible inventory management system that lets you manage inventory from any device or location. We’re an excellent choice for small and growing businesses, especially because our software is highly intuitive. If your employees can use a smartphone, they can use Sortly. It’s also easy to create individual profiles for every piece of inventory, adding photos and attachments for each item.
3. Embrace automation to save time and make fewer mistakes
As previously mentioned, more and more businesses are selecting inventory management software because its automation features help stakeholders manage inventory more efficiently and with fewer errors.
Barcodes and QR codes are especially helpful because they allow employees to scan items in and out using a smartphone or tablet, slashing the risk of data entry errors. Instead of jumbling numbers on a spreadsheet, employees scan codes that ensure the correct item is being edited or updated.
Sortly inventory management software offers automated low-stock alerts that let the right person know when a given item is dwindling too close to safety stock. Alerts can also be set for important dates, including loan end dates, warranty end dates, and expiration dates.
Sortly also allows stakeholders to generate insightful inventory reports that can inform essential inventory demand forecasting.
4. Use ABC categorization to prioritize inventory control efforts
Inventory control refers to the balancing act of ordering just enough inventory to meet customer demand without unnecessarily tying up cash in back stock that isn’t needed yet. Often, when a company is new to practicing inventory control, the thought of figuring out this sweet spot for every item on an inventory list can feel overwhelming. In that case, the best practice is implementing ABC categorization to identify which items are most important to a company’s customers and profitability and practicing tighter inventory control on those items first.
5. Optimize reordering practices
When a business is looking to optimize its inventory management strategy, one of the best places to start is how it reorders inventory and when. By maintaining a truly organized physical inventory space and a just-as-organized virtual inventory system, even the most complex businesses can know what items they have on hand and where they are at any given time.
Once compared against regularly recalculated reorder points and safety stock numbers, inventory counts can help businesses determine precisely how much inventory they should order each week (or month or quarter) to best meet customer demand without over-ordering. Again, if a business is not ready to practice universal inventory control, it’s best to begin with a small amount of inventory responsible for most of the company’s profits.
6. Audit inventory regularly
Even the best perpetual inventory management strategies require the occasional physical inventory audit. While inventory management software will always shave time off a physical inventory count, virtually every business dedicates at least some time every year to ensuring that the inventory on hand matches the inventory accounted for in their inventory system.
There are a variety of ways to perform such audits. Some businesses close shop to count inventory, whereas others perform inventory cycle counts, accounting for small portions of inventory at regular intervals over time. Other businesses count specific segments of inventory at random, accounting for everything only when something seems amiss. The best auditing method depends on the type of business you run and your inventory practices.
Regardless of how your business performs inventory audits, this time is also a perfect opportunity to ensure inventory is still being organized and stored in the most practical way. It’s also a great time to update the condition of assets in your inventory management system, especially if those assets have depreciated over time.
7. Communicate with suppliers
Finally, the last best practice for inventory management is strengthening relationships with the suppliers who provide you with the inventory your business needs. The stronger your relationships with these suppliers, the easier it is to negotiate more favorable deals—or at least better lead times and lower minimum order quantities.
At best, strong relationships with suppliers can lead to unparalleled insight into future concerns about supply chain vulnerabilities and fluctuating demand for products your business depends on. At the same time, if a supplier is underperforming, it’s considered a best practice to communicate with that vendor about the problems you’re encountering. Often, such issues can be remedied.
If not, you may want to start looking for a new provider. These questions can help you find a reliable vendor you can trust.
Sortly is an inventory management app that helps you track, manage, and organize your inventory—from any device, in any location. Our easy, flexible inventory system was designed to help businesses stay organized and efficient. Sortly comes equipped with automation features such as barcode and QR code scanning and customizable low-stock alerts. With highly visual item profiles and an intuitive, user-friendly interface virtually any employee can master, Sortly is a perfect solution for businesses looking to optimize their inventory management strategy.
To see how Sortly can transform how your business does inventory, start your free two-week trial today.