Inventory management for small business is something that most businesses can improve upon in one way or another. Following is a list of useful guidelines specifically designed to help business owners running a retail business.
- Don’t treat all products equally — There is a well-known business concept that is known as the “80/20 rule”. This rule essentially shows that statistically 80 percent of businesses sales come from 20 percent of their inventory items. This is the case for most businesses. Unfortunately, most businesses do not treat their inventory accordingly. Judging based on the 80/20 rule, a business should focus significantly on the 20 percent of inventory items that are creating 80 percent of the sales. The key here is to identify which inventory items are in that 20 percent and then to ensure that you never run out of stock of these items. Then you can address the other 80 percent that are less profitable.
- Wise-up about obsolete products — While attention should be given to the top 20 percent of best selling items, it’s necessary to address obsolete items, too. These items are not selling and are contributing to your inventory insurance premium. They are also occupying space that you could use for more profitable items. When you identify your obsolete items, it’s necessary to make a decision to remove them from your shelves. Nothing good comes from leaving them there.
- Pay attention to your suppliers — Depending on your business, you might be dealing with more than one supplier. While some suppliers are reliable and on time, there are also those that aren’t. Closely monitoring supplier activity and identifying both reliable and unreliable suppliers is crucial for the success of your retail business. Some metrics to track are: delivery agreed date and an actual receipt date, as well as quantity ordered compared to quantity received. Another important metric to keep an eye on is the condition in which merchandise was received.
- Consider inventory control software — Inventory management for small businesses can be significantly enhanced with the use of inventory control software. Inventory control software allows small business owners to have real-time information on how each item in their inventory is performing and whether or not they are running low on stock. It helps greatly to have this information available at all times, as you can use it to implement the first two guidelines.
Inventory management is tough to get right but by following the above guidelines, small businesses can optimize their inventory and ultimately have a more profitable business.