An essential aspect of business operations, inventory management includes keeping tabs on a firm’s inventory and monitoring specifications such as weight, dimensions, quantity, etc. The objective of inventory management is to make sure a company has sufficient reserves of its products/raw materials. This would stave off any loss in business opportunities because of inventory having been exhausted.
As important a function it is, the best way to manage inventory varies across organisations and systems. To begin with, it’s essential to put on paper par levels for all the items in your product line. This way, you would know the items to replenish should their stock dip below the pre-set minimum levels.
Secondly, consider FIFO (first-in-first-out) as the ideal, particularly while dealing with perishable goods. What happens here is that the oldest product (or batch) – one that came first-in – is sold off first. While this principle applies to non-perishable goods as well, the importance rises manifold with perishable items as you wouldn’t want to end up with spoilage that is no longer sellable.
At the same time, your ability to maintain cordial business and personal relations with suppliers can influence how easily you manage your inventory. That way, they’d be abreast with all inventory-related issues of yours and collaborate with you to resolve problems, if any. In addition to this, make a list of all the possible contingencies that may come up and draw an actionable plan that would help you tackle them better.
Additional Read: Techniques of Inventory Management that can Save your Money
And finally, categorise products according to the ABC chart, wherein products of high value but low sale frequency would belong to category A; products of moderate value with moderate sale frequency assigned to category B, and low-value products with a high sale frequency would belong to category C. To manage your inventory effective working capital cycle can also matter as if business comes with effective working capital cycle it can gain a sure growth.