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If you’re thinking about establishing a small business, or you already own one, one vital thing you need to pay close attention to is inventory management. Inventory management helps you to assess the progress of your business and ascertain whether it is on track for success. 
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Good inventory management ensures that you have the right quantity of products on hand and prevents the disappointment of products being out of stock when needed. It also prevents you from spending money on stocks that are not constantly being demanded by your customers. Simply put, with good inventory there would be no stock out, excess inventory, and unsold products. As simple as this might sound, a lot can go wrong if you’re not careful enough. Not to bother, this article is here to give you a proper guide on how to stay on the right track as far as inventory management is concerned.  Let’s get right into the tips for inventory management:
  • Invest in Good Inventory Management Software: The first step in inventory management is to set up your stock and supplier details in an accessible and reliable system. This is one of the best strategies for managing your inventory as a small business. In as much as some small businesses use manual tracking methods such as spreadsheets, the best retailer option is to use a point of sale (POS) system which would provide a vendor directory for you.
  • Build a good relationship with your suppliers: Even the best inventory plans encounter flops sometimes and when this happens, your relationship with your suppliers will speak volumes. An issue may arise where you need an urgent supply of products to fulfil an order and this invariably puts you at the mercy of your suppliers. Issues of quality control can be easily resolved when you have good relationships with your suppliers. To build this relationship, you need to pay invoices on time, meet suppliers at trade events and maintain a high-performing supplier as long as possible. 
  • Fine-tune your forecast: Accurate forecasting is essential to making projected sales calculations, analyzing market trends, predicting growths, etc.
  • Adopt the First In, First Out (FIFO) Approach: This is a very helpful strategy especially when perishable goods are involved. Products should be sold based on the sequential order with which it was purchased. This ensures that items do not sit around for too long, thus, reducing the risk of damage, product expiration, etc. To achieve this, new items in a warehouse should be added from behind so that older stocks can easily be accessed from the front.
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  • Tag and Label Inventory: Upon the arrival of products ordered, it is necessary to label your inventory before shelving it for sales. You need to attach the selling price of your product as well as product labels for easy internal tracking. You can fix labels directly on the product, on their shelving area, or their price tag. 
  • Stock Audit: It is advisable for you to periodically count your inventory to ensure that it tallies with what you have in mind. You can either choose to take stock annually, month-end or on the spot-checking. 
  • Reconcile Discrepancies: It is ideal for physical inventory count to match projected QOHs. However, in cases where you have more or less product than what is expected, you need to identify the problem and reconcile the difference. This difference is known as Shrink in retail. Shrinkage occurs when there is a clerical error as a result of misplacement or theft. Either way, you need to investigate it to ensure it doesn’t happen again. 
  • Employ a Stock Controller: In cases where you have a lot of inventory, you might need to hire someone to take responsibility for stocks. The job of a stock controller is to process all orders which have been purchased, receive deliveries, and ensure synchronization between what was ordered and what is being received.
  • Consider Drop-shipping: This helps you to sell products without having to take the inventory yourself. In drop-shipping, a manufacturer or wholesaler carries out the inventory and ships the product when a customer buys from your store.
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This article was first published on 21st February 2022

chidiogo-akaelu

Chidiogo Shalom Akaelu holds a degree in English and Literary Studies, from the University of Nigeria. She is a freelance writer, editor and founder of Loana Press, a budding online publishing outlet.

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