3 Inventory Strategies you must implement

What is Inventory Management

Inventory management is the tracking process of your business products as they are sourced, bought, stored and sold. It helps reduce costs and improve the company’s ability to meet customer demand and achieve own goals for profit and competitive edge. In this blog post we share some strategies and some tips to help you increase your revenue and reduce loss caused by inventory.

Basic Process Flow

1.      Product purchase order is created and sent to the supplier. Once accepted, it’s converted into a purchase invoice.

2.      Products are bought, acquired and stored. If you’re not using a software solution then you’re likely going to be counting the products manually which can waste a lot of time and there are also chances for error.

3.      When order is placed, generate sales invoice, dispatch products and update inventory stock.

We’re going to help you update your inventory process by familiarizing you with some strategies which can help you get competitive edge and acquire happy and returning customers.

SKU

Your SKU is the product identifier and should be unique for each product. You should be creative with the SKU and make it easy to understand in order to improve storing and retrieving process. An example SKU for White iPhone X 256 GB product can be iphone_x_w_256 instead of 2772732635452. This SKU is important to be mentioned on invoice as well. Each product with same SKU can be distinguished with its unique Serial or IMEI number.

Stock Control

The process of acquiring, dispatching and making sure “required stock” is available comes under stock control process. Your “required stock” can be based on formulas and strategies that we will discuss later. During product acquiring process, the unique serial numbers can be noted (preferably in your software) to improve your inventory process and have exact quantity and exact unique product serial numbers in the system which matches your physical inventory. This will make your dispatch process much smoother.

Safety Stock Inventory

Safety stock is the sweet number of products to meet the customer demands without increasing your product carrying costs. It sounds easy but to find out how much stock you should keep is the challenging part. You can use this formula

Safety stock = (max units sold per day * max lead time in days) – (avg units sold per day * avg lead time in days)

When to Reorder Stock

If you reorder stock too early, you will have to face storage costs and if you order late, you may have to face disappointed customers. Finding the perfect reorder time is important to maintain happy customers and keep costs low. You can use the formula

Reorder Stock = (days it takes from purchase order to receiving delivery * avg units sold per day) + safety stock

Unavailable Stock Error

If your inventory is managed manually then there are chances that you might have to face stock errors such as, stock being shown as available whereas it’s not actually present in the warehouse or vice versa. In order to reduce this error, you will have to move to digital solutions for inventory management and stock control.

Clear Old Inventory

You can accumulate old inventory which went out of style or no longer trending items if you did not plan your stock control process properly. ABC analysis is a great way to identify such issues and help you clear out items that may no longer be in demand with clearance sales or in some cases may need to be destroyed.

In ABC analysis, you classify each product SKU as A, B OR C based on following definitions which allows you to make an informed decision.

A: Low stock (10%). High value (70%)

B: Medium stock (20%). Medium value (20%)

C: High stock (70%), Low value (10%)

Software solutions

SMIELS is a great software solution to make your inventory process efficient and less prone to errors. You are able to create purchase orders which become purchase invoices once accepted. You can send and export these customized invoices in pdf and excel formats. You are able to input your acquired products with their SKU and unique Serial and IMEI number for each. When you make a sale, you can generate sales invoice and add product dispatch. If you don’t wish to validate IMEI or Serial numbers during this step you can disable that in the settings. SMIELS also provides advance user management features which increase sales coordination and team collaboration. You can also set custom roles and permissions for your team members. In order to handle accounting within SMIELS you can integrate your free account with a free Quickfile or Quickbook account as well.

To learn more features about SMIELS or register a free account, visit www.smiels.com.

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