Many businesses manage inventory well. Firms that recognize the importance and benefits of excellent inventory management, typically have better customer service, higher margins, and more robust cash flow. Follow the below three steps to improve your product management.
First, you need to have the products organized and a system to track inventory. While this sounds simple, many smaller businesses without an ERP system overlook the importance of even a simple spreadsheet that can record and track stock on hand. Stock is an asset, and it should be treated as such. When supply is untracked and unorganized, the result is more time spent troubleshooting, which can lead to unnecessary purchases. Keep track of what you have on hand and what is on order and ensure the inventory records are accurate. Proper management will save time and money and will increase efficiency and productivity.
Second, forecast your demand. In addition to being organized and tracking on-hand inventory, it is also essential to have a system or process to predict the market to determine needs before they are needed. Identify which items are high moving and stock those, if you can delay purchases do so. Cash is always something to manage and optimize, and proper stock management will maximize the money tied up in inventory. Don’t waste precious capital on slow-moving products. Proper demand management helps you figure out exactly how much inventory you need to have on-hand so that you to stock just enough inventory and minimize what is required in the warehouse.
The third is having a specific area for receiving and stocking products or materials, which should include a designated area for returns. While this is technically keeping organized (step one above), a good inventory management process requires extra discipline concerning returns. Returns need to be processed quickly, and often a proper return authorization (RGA) is required. Ideally, there should be a visual cue to identify what returned inventory needs an RGA, what has a pending RGA, and what stock has an RGA and is waiting to be returned. Once you get authorization to return, do it quickly. You have already paid for the inventory, and it will take time for your vendor to process the return and give you credit.
Proper stock management both requires and promotes an organized warehouse. If your warehouse is not held, you will have a challenging time managing your inventory. Better inventory planning (forecasting) will help identity which products are needed. If your product list is organized correctly, there will be a clear way to tell what products are stocked. Be space-efficient and cost-effective; proper inventory management is a sound business strategy.
Businesses can control inventory to increase profitability in their business. When a company manages inventory well, it will reduce the cost of goods sold. They will also be able to order more of the materials or products that sell well rather than ordering the things that do not sell as well and take up a useful resource, space. When businesses can keep a better supply of in-demand products, they are more likely to sell that product to a customer, rather than losing the customer to a competitor when they are sold out. This will increase revenue and the customer experience leading to the retention of customers for the future.
At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information: