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How you handle your inventory can have a direct impact on your business profitability, as un-optimised practices can lead to lost inventory, dead stock and a loss in revenue because of mishandled stock. Utilising inventory management best practices can help you ensure you maximise the profitability of your stock and warehouse space by giving you the tools and techniques to keep track of every piece of stock inside your warehouse.
Best Practice in Inventory Management
There are many inventory management best practices that you can follow, to help to optimise your warehouse. In this article, we will explore the following:
- SKU numbers
- Inventory control methods
- Warehouse storage
- Purchasing
- Stock takes and inventory auditing
- Demand forecasting
- Making use of technology
1. SKU numbers
Using SKU numbers are a basic, but extremely important part of inventory management.
What is an SKU number?
SKU stands for Stock Keeping Unit and an SKU is a unique alphanumeric code assigned by retailers to each individual product. SKUs are typically 8 to 12 characters long, and contain customised codes that are allocated to product characteristics such as colour and size.
Each retailer will customise their own SKUs to meet their product types and needs, and are used to identify and track products – packaging or price tag labels will typically include a product’s SKU.
SKU numbers can be used in a warehouse to aid in inventory management as they enable you to keep detailed and accurate records of availability of products and stock levels.
2. Inventory control methods
Depending on the type of products in your warehouse, there are various inventory control methods you can adopt, to ensure that stock is moving efficiently, and in a way that minimises stock waste.
FIFO – First In, First Out
The FIFO method is perhaps the most popular inventory picking method. It’s process means that the goods manufactured or purchased first, are the first to picked to leave the warehouse, resulting in the oldest inventory being shipped out first.
FEFO – First Expire, First Out
The FEFO method is one most commonly adopted by the perishable goods industry, with products that expire soonest needing to be picked and shipped first, to minimise the chance of goods remaining in the warehouse past their expiry date and going to waste.
JIT – Just In Time
The JIT method is for those who wish to hold as little stock on hand as possible – rather than stock-piling, thise method means you can make regular, small orders of stock to replenish stock as orders are placed. It reduces the amount of storage needed, and reduces the chance of having unwanted inventory if an order gets cancelled or is not fulfilled for another reason.
3. Warehouse storage
How your warehouse storage is laid out, can have a huge impact on how well you manage your inventory. Having a tidy warehouse, with clearly marked locations, as well as an optimised layout, can transform your inventory management.
An optimised warehouse layout will ideally locate popular items closest to packing stations, to speed up your picking processes, while also considering how your equipment and workers move around your facility. You will also have a clear record of which items are in each location.
4. Purchasing
Inventory management involves ensuring that you always have stock in your warehouse, meaning you’ll need to purchase more stock as levels get low.
One method you could use to for your understanding your ideal inventory ordering quantities and frequencies is ABC analysis.
ABC Analysis
By using the ABC analysis, you can understand your inventory and prioritise them into 3 categories:
A items
Your ‘A items’ are your high-value items, which sell less frequently, and therefore you need less of them in stock.
B items
Your ‘B items’ are your in-between items, they’re moderately priced and sell at a moderate frequency.
C items
Your ‘C items’ are lower cost items, which sell much quicker than your A and B items.
This method not only allows you to see which items your ordering in quantities, it also allows you to determine which items make up the majority of your inventory, and revenue.
5. Stock takes and inventory auditing
Another basic, yet crucial inventory management best practice is performing regular stock takes and inventory auditing. While you may keep track of your inventory day-to-day, taking a step back to check what you have inside your warehouse and products locations at regular intervals, will help you to ensure that you pick up on any errors.
This will benefit you, as you can correct any errors found quickly before they become a long-term stock error which could result in an accidental stock-out from incorrect stock levels, or wrong items being shipped due to incorrectly allocated locations.
6. Demand forecasting
Demand forecasting is the process of planning and predicting the right volume of inventory that you need to avoid over or under-stocking your warehouse. To successfully forecast what you’ll need, you’ll require access to sales, customer behaviour and seasonal trends data. You may find that at certain times of year, order volumes peak and therefore you need higher stock levels to cope, and that you have quieter periods too.
Demand forecasting is important as it helps you reduce how much excess stock you hold, which increases storage cost and fills up resource and storage space unnecessarily. Likewise, if you don’t have enough stock, this could cause customer dissatisfaction and delayed or unfulfillable orders.
7. Making use of technology
There are many technologies available to help you to implement inventory management best practice, the primary being Inventory Management Software (IMS).
The primary benefits of using an IMS are:
- Accurate stock counts
- Sync updates to ecommerce stores
- Inventory control methods such as FIFO and FEFO
- Traceability of inventory movements
- Warehouse mapping
- Reporting and analytics
In addition, warehouse technologies such as barcode scanners, RFID scanners and wearable technology for picking, connected to your IMS could further advance your operations.
How Mintsoft can help you manage your inventory
Inventory management systems are an essential part of running a successful business in today’s world. It is through them that companies are able to monitor their stock levels and provide insight into where customer demand is and trends that they can capitalise on in the future.
Mintsoft offers inventory management software to meet your needs and manage the stock in your warehouse with ease. Mintsoft can integrate with your existing Order Management System (OMS) and Warehouse Management System (WMS), or you can centralise your entire fulfillment process by using Mintsoft’s order and warehouse features too.
If you’d like to find out more, please explore the Mintsoft platform through our self-guided interactive tour or speak to our product experts for a personalised demo of the system.
