Introduction to Inventory Management
Inventory is the basis of any wholesale business, and the management of it can be an absolute headache if it’s not done correctly. But what is inventory management exactly? What’s the best way to approach it, and which software systems are out there that could assist? For answers to these questions and many more, read the deep dive below.
What is Inventory Management?
The systematic approach to sourcing, storing and selling your inventory, inventory management is a key step in the process of making a profit through your business. Effectively managing your inventory means the right stock, at the right levels, in the right place, at the right time, for the right price. Yes, that’s a mouthful, but with the right systems and software in place, it’s a lot simpler than it sounds.
Best Practices for Inventory Management
Now that you know what inventory management is and just how much weight it bears for your business, let’s take a closer look at these best practices you should consider:
● Start with your Business’ Data
Effectively leveraging large amounts of organised, aggregated data results in insights you’d otherwise not have direct access to. Inventory management by means of a software system means creating a ‘single source of truth’ or a point of departure for decision making.
● Maximise your Inventory Turnover
Inventory turnover is the calculation of stock sales and reorder frequency of any given period. For example, when working out the average over a year period, the equation divides the cost of goods sold by the average inventory and the result is then divided by 365 to determine how many days it takes to turn over your inventory.
● Forecast Demand
Unfortunately, when it comes to forecasting demand there is no one universal standard by which inventory can be planned. Accurate demand forecasting is never easy, and with extensive product ranges, multiple channels, promotional offerings and other external factors impacting demand, it becomes even more of a conundrum. That’s where automation and software come in.
● Automate Everything
Speaking of automation, it goes for more than just demand forecasting. Here are a few other inventory elements that can and should be automated through your choice of inventory management software:
➔ Multi-channel sales
➔ A variety of stock locations
➔ Set-and-forget orders and purchase processes
➔ Tracking expansion goals and revenue
● Track Inventory by Batch Number & Expiry Date
By using the batch numbers and expiry dates of your stock to track inventory, you’ll be able to easily tell where your inventory has come from and where it’s going. Additional benefits of this form of stock tracking include:
➔ Avoid inventory spoilage
➔ Ensure your stock is in-date
➔ Identify which batches to sell first
➔ Remove specific batches in the event of a recall
3 Steps for Inventory Management
Step 1: Create a System for Gaining Accurate Inventory Data
The first step toward successfully managing your inventory is to create a single source of truth through the collection and documentation of organised inventory data. This is the planning phase of managing your inventory. Whether you know it or not, your business is data-driven and as such your data needs to be accurate and accessible. With an inventory management software system like Dear Systems, you can track price information, SKUs and other metadata when completing your inventory profile.
Step 2: Create a Custom Process for your Business
With a structured approach to inventory management in place, you can create a customised and fool-proof system for readily responding to customers and the unpredictable nature of business. In this, you’ll need to set a well-structured process for classifying, categorising, barcoding and calculating inventory requirements. Cycle counting, storing, warehousing and delivering inventory should also be included in your customised process.
Step 3: Prepare for Fluctuations in Supply and Demand
Business is about constant improvement, and successful companies will never give up on this trait. Being changeable in business often means dealing with volatile supply and demand scenarios. With a reliable inventory management system in place, you’ll be able to make quick data-driven decisions and make continuous assessments of your inventory. Inventory management software can help to avoid the following:
● Having too much inventory
● Data loss
● Limited visibility
● New competition
● Inventory loss through spoilage or theft
Which Inventory Management System Works Best?
As experienced accountants who’ve worked with our fair share of wholesale clients, we recommend Dear Systems for inventory management. Dear Systems’ inventory management feature is seamless, easy, and efficient. As a cloud-based ERP software, Dear empowers its users to effectively manage inventory with up-to-the-minute updates and insights.
What are the Benefits of Dear Systems?
Manage Large Product Volumes: The challenges of wholesale product management are simplified through the creation of product families to house variations of the same products. Operate in Multiple Locations: Having multiple warehouses across a number of locations is no problem with Dear Systems inventory management as it provides a bird’s eye view of your inventory.
Automatically Generate Product Data: With Dear Systems, you can increase the speed and accuracy of your product choosing stage via efficient barcode scanning. This is an incredibly effective method of inventory tracking that saves time and reduces the risk of human error.
Streamlined Stocktake: With Dear, you can seamlessly sync physical sales with your inventory. This software gives you peace of mind that every retail transaction is reflected accurately in your inventory.
Inventory management doesn’t have to be an unavoidable headache. With Dear Systems software in place, managing the stock-flow of your business will be easier and more streamlined than ever.
Book a call with a Cloudworx accountant today for more on how Dear Systems can be employed to elevate the way you do business.
Cloudworx, Accounting for your Peace of Mind.