Inventory Management Techniques You Need to Start Using Today

Managing inventory is an exercise in keeping the plates spinning. There is your stock, the levels, location, cost, and timing, all of which require close attention on an ongoing basis. And the extent to which a business can calibrate each of these plates to spin at just the right speed can determine its tolerance for market volatility and competition.

In today’s landscape, that competition is fierce.

Best practices to follow when you don’t have inventory management software

To keep up, every organization needs to keep track of their inventory levels. But without a dedicated inventory management software to automate these takes for you, things can quickly become overwhelming. Though you can use the following methods for stock review or cycle counting, they do have a few drawbacks:

• Time-intensive
• Prone to error
• Not scalable

Still, these are known as the tried and true inventory management techniques for a reason—they work.

• Make a visual check – The easiest technique is to eyeball your stock. Visual checks usually don’t require any documentation, and they let you know exactly where everything is and how much is available.
• Use a tally/click sheet – This is an ongoing tally of sub-sections of your inventory in which you manually go through each item and tally each present item, which then creates a subtotal. If you do this method, don’t just write the total—actually tally and do hash mark counting before adding everything up. This should be your absolute bare minimum.
• Leverage a spreadsheet – Once you have your tallies, import them into your preferred spreadsheet software. Include the total amount of inventory on hand, its location, and when it was last counted. If you need a starting point, we created an excel inventory management spreadsheet for you to use.
• Move to electronic and automated solutions – This should be your goal if you’re not already there or not yet ready. By incorporating scanners, for example, you remove the human error that is inherently involved in manual data entry. As an added bonus, with any sort of electronic method, you can (or at least should) push all that data to your inventory management system for it to do all the heavy lifting for you.

Use cycle counting operations to enhance inventory accuracy

One of the best things you can do to improve your inventory management process is to start implementing cycle counts frequently. If you can do them every day before orders start shipping, that’s awesome! At the very minimum, we recommend weekly cycle counts.

This may sound difficult—even daunting—but accurate, efficient, and periodic counts will greatly improve your organization’s bottom line. Take the tips and guidance we outline above and start incorporating it into your warehouse operations. You won’t regret it.

Know your minimum stock level (MSL)

Knowing the absolute bare minimum stock levels you need is the key to running lean operations. It’s crucial! The ultimate goal is to have your last item leave the warehouse right as the new replenishments have been received and being put away. However, that’s unlikely and more of a pipe dream. But what you can do is calculate what that minimum stock level is and keep it easily referenceable. Now you tie this in with a frequent cycle count process and you’ll effectively create a way to be notified when your stock levels are reaching your MSL.

Empower your employees and teach them inventory management best practices

Improving inventory accuracy is not a one-person job. It will require buy-in from the whole organization and need to be part of your culture. But doing so will make your team members feel more valued and part of the success in your organization. You will be rewarded with more input, feedback, and productivity in return.

Make sure your team is aware of any changes in inventory management policies and practices, and train them on new technology or systems. The more informed and aware your employees are, the better your chances of seeing lasting change.

Label everything numerically

Another oft-overlooked inventory strategy for retailers is to label everything. And we do mean everything, especially throughout the warehouse. Label the aisles, each rack row, each bin, box, column, and spacer, and of course the items themselves.

Oh, and make sure to label everything numerically. We often see retailers wanting to adopt an alphabetic indexing system for their aisles, a numerical system for the rows, and maybe back to the alphabet for columns.

Not good!

It may seem intuitive at first, but if you want to improve your picking process, a numerical system is the way to go. Why? While most people do know the alphabet and can recite it quickly, you’d be surprised how many actually do have to perform the famous alphabet song to figure out the order of inventory items, especially for the ones in the middle if they don’t have any visual cues. Plus, you have a small range of single characters before you need to double up to AA or, even worse, AAA.

Most people can instantly quantify a number and determine the greater or lesser figure. So by maintaining a numbering system everywhere, you become more systemized and the recall and efficiency are much, much higher.

Schedule time to restock go-backs

Inevitably there will be mistakes that happen during the picking process, especially if you’re doing everything manually without software. Stockpiling items that were erroneously picked can create disorganization and lead to a potential shortage in the warehouse. By setting aside time and assigning someone to re-stock the go-backs, you’ll stay on top of your inventory and improve the organization of the warehouse.

The best inventory management processes to use with software

While you can manage inventory without software, four out of five doctors don’t recommend it. WE’RE ONE OF THOSE DOCTORS. When talking with retailers of all sizes, we nearly always recommend they stop using manual inventory tracking and management systems.

This might seem like a no-brainer, sure; but a lot of companies are still relying on manual inventory tracking and management systems. In other words, a lot of people still rely heavily on Excel spreadsheets.

But wait—I thought you just said to use an Excel spreadsheet, and even gave me a free inventory template?

As a last resort, yes. But Excel isn’t meant for these types of takes. Inventory is a living, breathing entity. Manual systems simply can’t keep track of all of the parts as they move. Spreadsheets become outdated very quickly, and they’re subject to human error and oversight. They don’t encourage cycle counts, they don’t yell at you if you picked the wrong item, and they don’t enforce inventory management best practices.

Track inventory in real time

When it comes to forecasting, managing production, and other important aspects of your business, it’s necessary to know how much inventory you have on hand. Having real-time inventory is the key to making quick and meaningful business decisions.

Real-time inventory tracking allows you to have a system that will update all your sales channels the moment a new order is received. Without real-time tracking, you could end up out of stock on an item for an important customer or, worse, sell an item that you don’t have.

Use SKU numbers and barcodes

Every one of your products has to be identifiable, so you need to assign them their own unique ID number. That is, a SKU number. Pretty obvious isn’t it? You’d be surprised how many retailers we see both new and mature that don’t incorporate some sort of SKU identification into their process.

It may work if you sell less than a handful of goods and each one is instantly distinguishable from another. But the keyword here is instant. The more layered inventory mixes that come with larger inventories, including the many similar items that need to be differentiated, the lack of SKUs will quickly become unsustainable. You want to make it as easy as possible for your warehouse employees to find the correct item.

Adhere to First-In-First-Out (FIFO) for perishable stock

If you work with perishable items, such as food items, supplements or medications, we recommend FIFO. Under the FIFO inventory method, the oldest items you purchased are sold first. This helps limit spoilage and expiration, which will leave you with unsellable stock that you have to take a loss on. Further, the FIFO method will also give you a more accurate (and often lower) cost of goods sold figure, which will help you on the balance sheet. To achieve a true FIFO inventory picking process you will need to be tracking inventory at the lot level. Combining inventory picking software with lot level tracking, you can ensure that you are always picking the right FIFO item.

Use barcode scanning to eliminate manual data entry errors

Once you know how much you need, you have to make sure you actually have it on hand or how much you received. Opportunities for miscounts are everywhere, especially in a manual process.

If during the receiving process, you are simply entering a number, or during order fulfillment, you’re simply marking a checkout that the job is complete, you’re going to have errors. A lot of them. Use scanners to scan your barcode during the receiving, picking, and packing process and you will forever look back on what life was like beforehand, wondering why it took you so long.

Know the location of your inventory

By leveraging barcodes and scanners you can track where your inventory lives at all times—to know who put a given item where and when. To know when that same item was moved and where it was moved to and by whom. Finally (and arguably the most important), to know when that item was picked and left the warehouse. All of this is enabled by simple automated tracking.

Automate your best practices once and for all

Software or no software, there are techniques and processes that any organization can (and should) use to manage inventory. It is essential to running leaning and controlling costs. Now, call us biased, but not all inventory management processes are created equal. And good inventory management software can help future-proof companies no matter their plans for growth.