Keeping on top of your inventory can feel like a never-ending task. But proper inventory management is important for ensuring you can meet customer demand, avoid unwanted warehouse fees, and improve cash flow. We’re going to take a look at some simple inventory management strategies that you can implement. Let’s dive in.
Benefits of effective inventory management
Reducing storage fees
Any seller will have factored in storage fees as part of their budget. This can include rent, utilities, maintenance, security, insurance, labour, equipment and software. With effective inventory management, you can optimise your storage space, reducing the risk of paying unnecessarily for stranded or dead inventory that isn’t shifting. For FBA sellers, Amazon charges long-term storage fees for units that are stored for more than 240 days. By accurately monitoring inventory, you can avoid these unwanted additional fees by making informed purchasing decisions, planning your sales strategy and implementing promotions to help shift stock.
Improving fulfilment efficiency
Ultimately, your customer service is the deciding point in making and maintaining sales. Simple inventory management strategies can help you avoid being out of stock of popular products and, in turn, shipping delays, which can harm your brand’s reputation. It also helps you avoid overstocking items and incurring unnecessary fees, or finding items misplaced due to them only being recorded as in stock once they arrive at the warehouse. That also means there’s a reduced risk of cashflow issues from overstocked items. By forecasting, you can lower the risk of both.
Increasing organisation
Whilst some prefer to manage their inventory manually, an automatic ordering system can really help the inventory cogs run smoothly. Your inventory can be accurately tracked and products automatically ordered when they’re running low. This helps you keep organised, allowing you to keep track of what’s been ordered, what’s selling well and what’s not.
Detecting problems early
Problems can happen, but with inventory management, you can be alerted to problems early and have time to fix them. This can include inventory errors or discrepancies, so it’s good practice to check your actual inventory against system records. This will help you avoid potential customer service issues down the line.
The inventory management process
So you know the benefits of efficient inventory management, but how do you do it? Let’s take a look:
1. Receive and inspect your products
All products that come to you should be inspected upon arrival. That way, you can check for any defects, and ensure the correct quantities and serial codes.
2. Sort and stock products
Store the products in your warehouse and update your tracking system. This can be organised by SKU or product type.
3. Sell the items
Now that your items are selling, process the order through a point-of-sale or inventory management system.
4. Fulfil and ship orders
Get those orders out as soon and safely as you can, ensuring the correct packaging and fulfilment options are met.
5. Reorder and manage existing stock
Keep an eye on the items that are selling well and those that aren’t, so you can replenish stock or plan sales strategies as necessary.
Simple inventory management strategies
So, what strategies can you employ to ensure your inventory management is achieving profitability, scalability and sustainability?
1. Conduct regular inventory audits
Just like a stock take in a brick-and-mortar store, inventory audits can be highly beneficial. It allows you to catch issues before they become a big problem. You should aim to conduct one or two audits a year. If you have a large number of products, it can be helpful to break them down into smaller sections, focusing on a couple of products at a time to make it more manageable.
2. Implement an inventory management system
If you’re worried about how time-consuming inventory management can be, you could always implement an automated inventory management system. It can help track your inventory for you and alert you when stocks are low, as well as helping control costs, improve delivery speed, and aid in planning and demand forecasting.
On Amazon, they have multiple options available. Their FBA services fulfil all orders, shipments, customer service and returns for you, automatically updating inventory levels in real time and providing accurate reports. FBM can save time and money by letting you ship orders yourself while still benefiting from their Amazon seller tools. They also offer multi-channel fulfilment, where you can outsource the fulfilment of orders that are placed through your own website, or other selling channels, to Amazon. Systems such as Veeqo can sync, track and update inventory across all your channels, locations and FBA.
Once your business reaches a certain size, it’s worth using a 3rd party software, as FBA can make mistakes. By using an external provider, you can keep track of misplaced units, which can then be claimed for.
3. Build strong supplier relationships
Your suppliers benefit from your sales just as much as you, so it’s important to maintain healthy relationships with them. The last thing you want is to be out of stock because your supplier is unable to get items to you, be that through shipment, manufacturing or other issues. Make sure you pay your bills on time, communicate frequently and respectfully, and build goodwill by referring their business to others. Positive interactions will build success for you both.
4. Managing returns
How you manage returns is not only important for your customer service and brand reputation, but also for controlling your inventory. Using the Reverse Logistics programme through Amazon moves the products from the customer back to the seller or manufacturer. Once received, you can then conduct product repairs, maintenance or repackaging as necessary. This can reduce costs by recycling or reusing material, as well as generate revenue and improve customer satisfaction. If you use FBA, customer returns can be managed directly by Amazon.
5. Create promotions to shift excess stock
If you have aged inventory or an overstock of products, plan promotions or sales events to help shift them. If you use FBA, there can be additional costs for Aged Inventory, so this is an ideal solution.
6. Track popular products and plan for seasonal events
Track the products that sell well and monitor how many days’ worth of stock you have. These are the products that are bringing in the profit, so you don’t want to run out. Make sure there are enough backup units as well in case you encounter any supply chain issues. In particular, look back at previous sales data to forecast any seasonal sales events that come up on Amazon, such as Prime Day or Black Friday. Demand can increase when certain holidays come around, so prep in advance and send your inventory ahead of time.
7. Use environmentally-friendly practices
Showing customers that you care about the environment is becoming a huge factor in people’s purchasing decisions. To improve your sustainability practices, track what products sell well and what don’t. It’s all about reducing waste and using resources wisely. Consider donating or recycling items that don’t sell, instead of paying liquidation or disposal fees. You can also work with your suppliers to make shipments more efficient, see if there’s anyway you can reduce your carbon footprint, and consider eco-friendly packaging to make a difference. These sorts of solutions can also put you in consideration for the Climate Pledge Friendly programme. This is a programme created by Amazon that highlights products that meet their sustainability standards.
So, if you’ve been struggling to manage your inventory recently, these simple inventory management strategies could be the solution. We absolutely love using the automated inventory management systems available, so if you need any advice or pointers, get in touch with us today. We have a lot of experience using various tools and can help get you on the right track, meaning you can focus on the fun parts of building your business.