How to Optimize Your Inventory
Are you looking for a better way to manage your inventory?
Whether you are new to inventory management or want to know if there is a better way to optimize your inventory, you are in the right place. Today's topic is inventory management optimization.
But first, let us dive into the importance.
🍦Let us think of your favorite ice cream shop. The shop’s most popular flavor is chocolate, which happens to be your favorite as well. If that particular flavor is sold out every time you visit the shop, there is a high chance that you feel unsatisfied regardless of how good the taste is. Your experience of the shop will continue to be negative, even if there are other flavors to choose from.
When your product is out-of-stock, it affects your customer’s satisfaction and thus affect your business’ sales. If a product that the customer is looking for is never in stock, there is a likely chance the customer will choose to visit another store in the future.
Without over or under stocking, how can we always have an optimum level of inventory in storage? The key is optimizing your inventory. 🗝
What is Inventory Optimization?
Although the phrase ‘inventory optimization’ may seem like a grandiose process, it is actually about getting to know your inventory better.
There are a variety of processes to help you start optimizing your inventory. One process starts with checking your inventory management process. If there is a large number of quantities frequently missing at the end of the month, it may be a sign that your team needs to implement an inventory audit regularly.
Another method would be to start calculating your inventory turnover rate. 📊
Inventory Turnover = COGS / Average Inventory
COGS = Cost of Goods Sold
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
If the number is too high, it might be due to either your business doing well or ordering too few products per cycle. If the number is too low, you may want to consider ordering less and conduct clearance sales for items that are stuck in storage.
Let us get a closer look at inventory optimization.
3 Ways to Optimize your Inventory
- Categorize Your Inventory
If your clothes were rambled together in a big pile, it would take a long time to find the piece you want. So in most households, clothes are organized in hangers or drawers by their category. This form of categorization actually works well with inventorying. When registering your products in a list, make sure to insert categories as well. Categories help to sort and filter your products in a group and increase the visibility of your inventory.
- Barcode Your Products
Even if your products do not have a barcode, it does not mean you do not need one. Barcode not only acts as a unique identifier for your product, but it also helps minimize your time searching for the product. With the help of a barcode scanner, not only is checking the product status easier, but also conducting an inventory count becomes less troublesome.
- Use a cloud-based, real-time inventory software
With cloud-based, real-time inventory software, not only is your inventory data secured but also all team members are able to check current inventory updates simultaneously. Especially with stock control software provided in both desktop web and mobile app versions, it helps to manage whenever, wherever and greatly increases inventory accuracy.
Looking for inventory management software?
BoxHero is the easiest inventory management program for any size or type of business.