MYTHS OF INVENTORY MANAGEMENT
AND THE BEST PRACTICES TO GET YOU BACK ON TRACK
Inventory Management Best Practices are not complicated, yet many businesses out there are “winging it” with procedures that barely keep them afloat.
As logistics experts, our goal at TQS is to remove any hindrances that may be in your way, so that your growth is smooth sailing.
Below, we’ve compiled a list of the most common mistakes we see, and followed each one with some truth to dispel the myth.
MYTH 1: USE PEN AND PAPER
You know your inventory the best, of anyone. So who better to keep track of it all? Besides, pens and paper are cheap. Printing up a spreadsheet is the most cost-effective way to go.
The truth is, even a startup should be using an inventory management system. They virtually eliminate human error, which alone is well worth the implementation cost. They can also speed up the accuracy and efficiency of your order processing, which is even more money saved.
The type of product you sell will play a large part in determining the type of warehousing hardware and software you need. There are several categories of inventory systems; though they all serve the same general purpose, their differences are important. Manufacturers may be best served by Manufacturing Resource Planning (MRP) software, and a complex distribution center may instead choose a Warehouse Management System (WMS.) Retailers are more likely to need a simpler Inventory Management System (IMS). Look into the software vendors which are most likely to serve your needs, and compare the features offered at each pricing tier. Do your homework before signing any dotted lines. The wrong fit may still get the job done, but the right fit will save you a LOT of headaches.
MYTH 2: RENT INVENTORY SPACE NEAREST THE PRIME RETAIL LOCATION
“Go big or go home.” It's fair to assume that your street visibility will have a direct impact on your brand awareness, and in turn, your marketability.
Assumptions are almost never a good idea in business. Just like any other piece of realty, the factor that weighs more than any other in choosing your Warehouse HQ is location, not your image. If your typical on-hand quantities are relatively low, then you might be able to consider a more centrally located warehouse to ensure responsive local shipping (and to shorten your daily commute). If your inventory volume is prone to fluctuate, or if your success depends on continually expanding your product lines, then a larger warehouse further away from town is probably the better bet.
MYTH 3: LOW-STOCK ALERTS ARE REMINDERS TO ORDER MORE INVENTORY
Make sure that you completely sell off every item in a SKU before you order more. No one wants bits and pieces laying around, cluttering up the warehouse.
The cliche that “timing is everything” probably came from a wise purchasing manager. You should almost never have zero stockon hand, but you should practice getting close to it. Your new inventory should be arriving at your doors right when your customers would get a low-stock alert; the alert is incentive for them to buy urgently, not for you to re-up your stock. The right replenishment time is somewhat preemptive.
MYTH 4: AUDITS ARE FOR ACCOUNTANTS
Why obsessively count every item in your warehouse? You should only be double-checking your on-hand counts when you have reason to — like when a customer orders something that you can't find.
Most warehouses should be conducting rolling inventory audits. Not only will having consistently accurate records keep your customers, warehouse managers, and accountants happy, but it will also alert you to any potential problems. Problems of the “I accidentally skewered a box of widgets with the forklift and hid the evidence” variety, among others.
MYTH 5: TRUST THE SYSTEM
Your “quality control” should be accomplished at the beginning, not at the end. The right planning and preparation ensures a perfect outcome, every time.
Sure, an ounce of prevention equals a pound of cure. This is universally true. But sometimes the ounce of prevention is a last minute double-check, whereas the pound of cure would be apologizing profusely to your best customer and offering them a steep discount on their next order to keep their business. Quality control isn’t just for the integrity of your product; it’s for the integrity of your reputation, as well.
MYTH 6: SETTLE IN FOR THE LONG HAUL
Don’t keep shifting around the product lines in your warehouse. Let your warehouse workers get familiar with where everything is, and they’ll never lose anything. It’s OK if your cold product is at the front of your warehouse - it just means that you’ll get rid of it sooner.
The reality here is similar to the section about audits; an optimized warehouse is commonly an ongoing affair. Many inventory management systems also track physical location – as long as your system is synced, your dockhands will never wander in search of something. They may even thank you for keeping the fastest-moving product within easy reach.
MYTH 7: REPORTS ARE YOUR BACKUP PLAN
You can generate reports on an as-needed basis, such as when you lose a customer, or the IRS comes calling.
Reports are not a backup plan. They keep you from needing to rely on one.
Generating reports should be your bread and butter; they’ll help you with almost every aspect of maintaining a sharp edge in your market, and even in your warehouse. Some reports should be analyzed yearly, others quarterly, and some even daily. Get a big year-at-a-glance calendar, stick it on your wall, and map out when the milestone reports should be generated so you can see everything coming down the pipe.
For a retail example, your reports on the Christmas shopping season should be generated and acted on in February the following year. This gives your vendors time to pay, which is critical information for a complete report. This is also the best time to buy inventory for the next holiday season, as everything Christmas-related will be at its deepest discount. Your reports on the effectiveness of your email marketing campaign, on the other hand, should be generated and reviewed weekly.
You should be able to get an instant, accurate, comprehensive view on every aspect of your business. Reports are how you do that. They measure performance, find problem areas, and reveal opportunities, giving you the edge you need to stay ahead of the game.
In short, another admittedly valid cliche; “Anything worth doing is worth doing well.” If you plead guilty to any of the above myths, don’t worry. Your next break-through phase of growth could be as simple as a starting a new habit. The above myths about Inventory Management Best Practices are easily corrected.
To learn more, schedule a consultation with one of our associates.