The Ultimate Guide to Inventory Management Optimisation

Managing your inventory well is crucial for any business, especially for small to medium-sized ones. Good inventory management can help reduce costs, improve cash flow, and keep customers happy. But it can be tricky without the right tools and knowledge.

We’ve pulled together some of our top tips to help you get started on optimising your inventory management. There are plenty of things you can do on your own, but for the ultimate strategies that make a real difference, having a partner like SMB Consultants can be a game-changer. Let’s dive in!

What You Can Tackle In-House

You’d be surprised at how much you can improve your inventory management with a few simple steps. Here are some actions you can manage within your company:

Get Your Product Data Right

• Check Cost Prices: Make sure every product has the correct cost price, including for your COGS. Trust us, it makes a big difference.
• Avoid Duplicate SKUs: Double-check that you don’t have duplicate SKUs and barcodes. It’ll save you a lot of headaches.
• Use Proper Units: Assign unique SKUs for different pack sizes to keep things organized.
• Consistent Naming: Standardize your product names and avoid special characters in SKUs.
• Categorize Products: Organize products into the right categories for better reporting. It’s like tidying up your inventory closet.

Use Historical Sales Data

• Look at Past Sales: Use past sales data to predict future inventory needs. It’s like having a crystal ball for your stock.
• Plan for Seasons: Identify and plan for seasonal demand changes. No one wants to run out of ice cream in the summer.

Maintain Stock Transparency

• Real-Time Tracking: Use systems that show real-time stock levels. Knowing what you have on hand is half the battle.

Keep Safety Stock

• Buffer Stock: Maintain extra stock to handle unexpected demand or supply issues. Better safe than sorry.

Ensure Consistent Data Entry

• Standardized Entry: Make sure everyone follows the same data entry practices, including using standardised names, barcodes, and units. Consistency is key.

Introduce periodic stocktakes

• Regular Checks: Once you're data ducks are in a row, introduce periodic (monthly, quarterly - whatever works for your business) stocktakes to ensure accurate inventory data and prevent overselling. We have another post that covers the how to of stocktake that would be worth checking out.

Plan Demand with Your Team

• Work with Teams: Collaborate with sales and marketing to forecast demand more accurately. Teamwork makes the dream work.

Track Performance Metrics

• Monitor Key Metrics: Keep an eye on key performance indicators like order accuracy rate, fill rate, and inventory carrying cost.

The Advanced Strategies That Make a Difference

Now, let’s talk about the big guns. These advanced strategies can truly transform your inventory management, but they’re best tackled with a bit of expert help and after you've mastered the basics mentioned above. Partnering with experienced consultants like SMB Consultants can provide the expertise and tools needed to implement these high-impact strategies:

Advanced Integration and Forecasting

• System Integration: Ensure smooth integration between inventory management systems and accounting software. This seamless connection helps maintain accurate data and streamline operations.
• Advanced Forecasting Tools: Use sophisticated tools to predict inventory needs based on past data and trends. Accurate forecasting can significantly reduce costs and improve stock availability.

Strategic Vendor and Inventory Management

• Supplier Relationships: Build strong relationships with suppliers and negotiate favorable terms. Reliable suppliers can offer better lead times, bulk discounts, and flexible ordering options.
• Inventory Segmentation: Divide inventory based on factors like demand variability, lead time, and profitability. Tailored strategies for each segment can lead to more efficient inventory management.

Advanced Inventory Techniques

• Just-In-Time (JIT) Inventory: Implement a JIT system to minimize holding costs and reduce excess inventory. This approach ensures inventory arrives exactly when needed, reducing waste.
• Cross-Docking: Use cross-docking to reduce handling and storage time. Products are directly transferred from inbound to outbound transportation, speeding up the distribution process.
• IoT and RFID Technology: Leverage Internet of Things (IoT) devices and Radio-Frequency Identification (RFID) technology for real-time inventory tracking. These technologies provide greater visibility and accuracy.

Continuous Improvement and Automation

• Regular Reviews: Regularly review inventory practices and make improvements based on data. Continuous improvement ensures that your processes remain effective and efficient.
• Cycle Counting: Implement cycle counting as an alternative to full physical inventory counts. This method helps maintain inventory accuracy without disrupting operations.
• Automated Adjustments: Automate adjustments for stock write-offs, damaged goods, and other changes. Automation reduces manual errors and ensures data accuracy.

Optimise  to Thrive

Optimising inventory management is key to a thriving business, especially for small to medium-sized ones. By handling what you can in-house and knowing when to leverage advanced strategies with expert help, you can ensure your inventory management system is optimised for success. 

At SMB Consultants, we take the time to really get to know your business. We understand that every business has its own unique challenges and goals. That's why we don't believe in one-size-fits-all solutions. Instead, we work closely with you to develop custom systems and workflows tailored specifically to your needs. Our goal is to help your business not just manage inventory, but thrive and grow. Whether you're looking to streamline operations, improve accuracy, or scale up, we're here to support you every step of the way.