Inventory management is not an entertaining activity at all. It’s monotonous, it demands a lot of time and energy, and the risks of a negligent management is always high. The amount of money that a company may lose because of it is huge. But working is not entertaining, and inventory management is far beyond important for the growth and maintenance of any company. In this post you can find a practical guide for inventory management: some mistakes you should avoid, the way you can fix them in case you have fallen in those pits and a series of principles you should take note of, in order to structure your inventory management to the point of excellence.
Let us start.
1 . Wrong Inventory Monitoring
If you already know the amount of items you need, the next step is to have a certain idea of what you have. Miscounting is very easy to happen, actually: while doing pilferage, order fulfillment, manufacturing (when production is going on) or while receiving. But if it happens, it’s not the end of the world: technology is your best friend here. You can reduce data entry errors to the minimum by using a barcode scanning system and an electronic data interchange.
2. Microsoft Excel or Lotus 123 Spreadsheets
It’s not just that there’s simply no dumb-proof system for several people to synchronize the same inventory at the same time. It may have happened to you and I can hear you swearing to heaven: You delete the spreadsheet by accident, a blackout happens and you did not save, a virus erases your files. What is there to do? Purchase a good software, dear, there’s no more to say. Search one that makes security copies you can keep safe and away from dangers. It may also be useful for checking not just all the inputs and outputs, but who buys what, how much and when. It could be useful.
3. Excess of inventory
You can spend three times the capital of your company just on inventories, believe me, and the real issue here is that an excess of inventory means losing working capital and profits. Obviously, you pay a big amount of money on warehousing, and old inventories may get damaged or lose its price eventually. So, the solution here is basically knowing the precise amount of supply you actually need and when you need it. Don’t feel afraid of getting short. How much have you sold last year? You can calculate, depending on the moments of the year you sold more or less. And never forget: (a) make what you can actually are able to sell, (b) sell what you can make and (c), please, stop making it if you are not able to sell it. Trace a balance between realism and optimism: that’s strategy.
4. Lack of plan B (and C)
Everything can happen to your computer, especially when you give your plan A (maybe your only plan) for granted. A fire, another virus… Godzilla can happen in this crazy world. Then what? Didn’t you think of the worst-case possibilities? You should. When it comes to logistics, being pessimistic (and sometimes pathologically paranoid) is a need. It does not matter that nothing bad happens. Remember Murphy’s laws, pal, I know what I’m talking about. So, do the homework and always save critical data: USB’s, the cloud, an external hard drive, etc. It won’t take you much time, and you will be the hero when Godzilla finally happens.
5. You don’t have a proper priority scale
I get you: you feel you need two lives in a row for monitoring and keeping track of every single detail of all items in your inventory. Question: What can I do? Answer: Remember that the eighty percent of the demand is always produced by the twenty percent of your inventory. Work more on that percentage and less in the rest.
All right: a 1-A inventory system have seven requirements that you should consider general principles:
- Use a software for monitoring all the inventory activity.
- Create right units of measure for your inventory.
- Define your items by well descriptions.
- Spend enough time for organizing clear location labels and location names.
- Number all your items by a unique number for easier tracking.
- Spend time by training your workers on the management of your inventory system.
- Don’t forget the backup and the plan A, B and sometimes C.
No one better than you know your stock, your systems, your people and the processes of your own company. But tips are always welcome. I hope this guide helps you to improve your inventory management. See you next time.