If you struggle with keeping your stock organised, you need to start focusing on product inventory management. On this page, you will find all the information you need to kick start your efforts in this area!
Your inventory is your biggest asset, and in order to function successfully as a business, you must make all the right decisions in regards to your inventory and ensure its seamless functioning.
However – this is not an easy task. Streamlining product inventory in a way that not only expedites the fulfilment process but also prioritises the perfect handling and storage of each product is a difficult balance to strike, and many businesses fail in this area. However, you don’t have to!
If you start focusing on product inventory management today, you can evolve your inventory and take it to the next level without any major hindrances. And that is exactly what this mini guide to product inventory management is going to help you with.
So, what are you waiting for? Let’s get right into learning how to evolve your product inventory management strategy.
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Usually, product inventory is considered to be just another name for inventory, However, it must be noted that more often than not, ‘product inventory’ is used to refer to finished goods inventory. So, all the products within your warehouse that have successfully gone through the manufacturing stage and are now finished as well as ready to be sold off to the end user are finished goods, and usually these products make up the product inventory.
Following this, product inventory management involves logistical processes that are executed primarily to manage these products in the warehouse. Inventory managers focus on maintaining these products to the best of their abilities and making sure that they are in pristine condition throughout their storage period. It also involves ensuring that the transit of these products, both within the warehouse and outside of it, is completed without any hindrances.
The inventory of your business is its important asset. For starters, it is uncapitalised. So, any damage to your stock will definitely lead to you incurring a loss that you don’t always end up recovering. But that is not the only reason why product inventory management is so important.
In fact, product inventory management is vital to the way you run your business because without it, you simply wouldn’t know what to do! You wouldn’t know how much stock to order or what to do with it. By focusing on streamlining your inventory management, you get a better insight into your business and make considerably smarter decisions.
That’s not where it ends – you must also remember that product inventory management is the best way to impress your customers. Customers of the 21st century want a fulfilment experience that is unique but also checks off all their expectations. For businesses, this means they have to put in the extra effort to make sure that their services are impeccable. This would, of course, majorly be dependent on how advanced your inventory management techniques are. The state of your inventory indubitably feeds into the customer experience you have created for your customers, and the better your inventory management methods are, the more chances you have of impressing your customers beyond the basics.
If you are even remotely familiar with fulfilment and the amount of effort that goes into perfecting it, you would know that nothing that forms an integral part of the fulfilment experience can ever be easy. Product inventory management is no exception.
So, yes! It is challenging. There are many obstacles involved: maintaining accuracy, expediting processes, efficiently responding to customer demand, and using warehouse space properly – all of it can lead to problems with product inventory management and hence, make it a challenging environment.
However, the good thing is that dealing with these challenges, at least in today’s time and age, is not that hard. With the help of the right techniques, tips, and technology, you can actually tackle all of these challenges, work past them, and take your business to where it actually should be!
Let’s have a look at some of the most common product inventory management techniques. Needless to say, all of these accommodate a completely different set of needs, and you really have to see what works for you and what doesn’t.
Yet, in general, all of these are helpful and hence, our discussion for each shall help you understand how these would fit into your business processes:
Economic order quantity, also known as EoQ, is a product inventory management term that refers to the ideal quantity of products a company should purchase to minimize its total inventory spending. As such, this technique’s main purpose is to help a business take control of its cash flow and hence, it involves a formula that can help you calculate the exact amount you need to make the right adjustment to your budget.
This is the formula used: EOQ = square root of: [2(setup costs)(demand rate)] / holding costs.
This technique is quite a well-loved one when it comes to managing product inventory. The way ABC analysis works is by breaking down your inventory into three distinct sections or classes: Class A, Class B, and Class C (hence the name ABC analysis!).
The products in Class A are top priority, high-value products, and the inventory for these are supposed to be small in accordance with the sales. The products in Class B are the mid-value products with an inventory that again, corresponds with the customer demand. And Class C products are the low-value, high-sales products, with the biggest inventory as these usually sell the most.
Working with an ABC analysis means that businesses get a better idea of how to handle their products and which products need to be managed at what time.
Just-in-Time or JIT is yet another product inventory management technique that is favoured and vouched for by tons of retailers. This technique involves receiving inventory just before selling it. So, instead of keeping your stock around in your storage space for weeks, months, and sometimes even years on end, you keep it around for as less time as possible before it’s off to be shipped to the end-user.
There are many benefits associated with JIT; it helps you become more efficient, utilise your resources a lot more properly, and experience an undeniable decrease in waste.
Safety stock, as the name suggests, involves extra inventory that acts as a safety net. It is usually just a little beyond the expected demand, and is primarily ordered to make sure that any stock outs can be dealt with without impacting the business’s sales.
Although quite helpful, you should always have a systematic approach to ordering and utilising safety stock, because too little of it will render your efforts useless whereas too much could lead to other problems like the excess inventory crisis.
Reorder point is a product inventory management term that refers to the minimum unit quantity a company should have in stock before they go ahead and place an order for more. An inventory management technique that revolves around reorder point ensures that stock outs don’t occur and that at the same time, you don’t push yourself into having an unnecessary excess inventory management crisis.
It is quite similar to the safety stock technique, but your reorder point is always likely to be higher than the safety stock number as you have to factor in order lead time.
First In, First Out and Last In, First Out methods are also effective inventory management techniques. FIFO revolves around selling the oldest inventory first, whereas LIFO gives priority to new inventory. The goal of FIFO is to keep inventory fresh whereas LIFO prevents products from going bad. As such, they align with different goals, and usually businesses will choose either or.
However, LIFO is used a lot less frequently than FIFO, as FIFO seems to be the more practical option for most businesses and also is a lot more convenient for them to execute seamlessly.
Another inventory management technique that has recently been on the rise is collection-in-person. This involves offering customers to collect their orders in person. For a business, this is more beneficial as it helps you cut back on shipping costs and also simplify inventory management to a great extent.
Although collection-in-person is not as common as one would think, it is slowly gaining traction as bigger brands incorporate this technique in their inventory management strategies and use it to make sure that their product inventory remains top notch.
Now that we have taken a look at all the different techniques you can make use of for your product inventory management strategy, let’s move on to the 5 tips that will help you get started with successful product inventory management as soon as possible.
One of the biggest challenges inventory managers face with product inventory management is knowing who takes control. Since there are many people involved in the inventory management processes, it can often be confusing to figure out who does what.
Yet, in order for maximum efficiency, you need to be clear on who takes control! Our suggestion is to make a proper structure for your inventory that delegates authority to an individual or even a team of people; whatever you deem fit for your business. This will help you have a much more confident grasp on the functioning of your inventory, and will allow your staff to take a more systematic approach in this area.
Your warehouse is indubitably the backbone of your product inventory management processes. In order to make sure that everything is running smoothly, you need to start making some changes to the way your warehouse functions. For example, you need to optimise your warehouse space to accommodate stock storage in a safe and secure manner.
This extends not only to your space, but also to your people! Your workforce should be managed strategically, which will help you become more efficient in the area of product inventory management a lot better too.
If you want to make sure that the product inventory levels you have present align with customer demand, you need to bring accurate demand forecasting to the forefront of your processes.
By basing your inventory on accurate demand forecasting, you will make sure that you don’t have too much or too little stock on board, as well as ensuring that whatever stock you do have aligns with what your customers expect you to provide them with.
No business enjoys missing out on orders, which is why you have to put in the extra effort to make sure you never run out of stock. There are many techniques that will allow you to enhance your framework in a way that ensures that you are fulfilling all orders, and that too on time.
Following this, you can even improve your revenue and see a positive change in your sales, as well as a boost in your customer satisfaction rates.
If you are lost on how you will be implementing all the aforementioned tips into your logistical processes without compromising on their ongoing operational consistency, we have a magic solution i.e. a product inventory management system.
A product inventory management system can help you achieve the most organised version of your inventory, and hence is integral to your success in this area. It is more or less also the only way you can make sure that you are remaining at par with the expectations you should be meeting to emerge as a leader in the industry.
For this reason, the most important tip on this list is this: invest in a product inventory management system as soon as you can, and make sure your business is going in the right direction.
If you are not sure on how a product inventory management system works and how exactly it can help you improve your product inventory, here are just a few ways it does so:
This one may sound a little vague but when you come to think of it, we don’t always know how to take care of our products in the best way possible. The good thing is that with a product inventory management system, you don’t have to worry about any of that. It automates all the major inventory management processes, so most of the burden is taken off your shoulders but you still get to take care of your products properly.
Budgetary considerations can often dent your efforts, which means that you may not be able to achieve the kind of efficiency you want to achieve, just because you don’t have enough resources. Well, with a product inventory management software, that is not a problem anymore. Because it helps you save money on the actual execution of so many processes, it grants you the ability to save resources that can be spent on things that will actually contribute to the overall success and growth of your business; and that without requiring an extremely big investment from your end.
Optimising your warehouse space should be one of your top concerns; primarily because product inventory management can simply not be executed seamlessly if your warehouse space is not properly optimised to support your stock requirements. However, making these decisions without proper data is akin to shooting in the dark. With the help of a product inventory management system, on the other hand, you get the chance to harness accurate data which can enable you to make informed decisions in regards to your warehouse space. Not only can you make practical changes to your warehouse based on this, but you can also make all the fulfilment processes that take place within the warehouse a lot more efficient and aligned with your ultimate goals.
After the Covid-19 fiasco, if there is one thing that warehouse and inventory managers can be certain of, it is the fact that the future is extremely uncertain. Yet, this doesn’t mean we should leave everything to fate. If you want to succeed, especially in the area of product management, you need to be agile and adaptable; and so, ready to face the future, whatever it may be. With the help of a product inventory management system, you can prepare for the future a lot better, whatever it may or may not turn out to be eventually.
Most businesses will put themselves through strenuous situations; just so they can grow without restrictions. This is true for product inventory management as well. Business will pour blood and sweat into this process, just so they can expand and see their business development take the turn they want it to take. However, if you employ a product inventory management software into your operations, you don’t have to worry about any restrictions and can fully as well as freely focus on the ultimate goals of expanding as a business.
Product inventory management is crucial if you want to see your business grow – and the only way you can streamline it without any problems is by employing a product inventory management system into your operations.
And if you are looking for the best one in the market, you’ve got to give Canary7 a try!
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