The Importance of Tracking Inventory and Inventory Management SoftwareBy My Service Depot on Monday, August 17, 2020
A good inventory management system can help your business keep track of inventory spread across multiple trucks or warehouses.
A company’s inventory is one of its most valuable assets. In retail, manufacturing, food service, and other inventory-intensive sectors, a company’s inputs and finished products represent the core of its business. A shortage of inventory when and where it’s needed can be extremely detrimental.
At the same time, inventory can be thought of as a liability. A large inventory carries the risk of spoilage, theft, damage, or shifts in demand. Sometimes, inventory must be insured, and if it is not sold in time it may have to be disposed of at clearance prices—or simply destroyed. For these reasons, inventory management represents an important consideration for businesses of any size. Below, we will lay out a few inventory management options, some crucial things to consider when tracking inventory, and how these things come together in the ultimate inventory management software solution.
1. Single Warehouse – Depending on the size of your business, you might get by with a single stock location, or you may consider tracking your inventory on a per truck, or employee basis. Single warehouse tracking can work great for the smaller business. This allows you to accurately keep track of what comes in and goes out of your shop on a day to day basis.
2. Multi-Location – Multi-Location inventory is the preferred inventory management option for most medium to large sized businesses. With this method, you have a central restock location such as your shop, or a warehouse, but you also record and track the inventory per individual truck. This method will give you the most insight into tracking the individual consumption of products for your business.
3. Purchasing Inventory and Vendors – Purchasing parts and materials to replenish your inventory makes up a big part of inventory tracking as a whole. For this, choose a field service software that integrates vendors and parts ordering. Smart Service and QuickBooks work together as a fantastic inventory management solution. This system ensures that the cost of your inventory remains tied to your profits, providing an accurate profit/loss model for your business.
Tips for managing your inventory:
1. Prioritize your inventory.
Categorizing your inventory into priority groups can help you understand which items you need to order more of and more frequently, and which are important to your business but may cost more and move more slowly. Experts typically suggest separating your inventory into A, B, and C groups. Items in the A group are higher-ticket items that you need fewer of. Items in the C category are lower-cost items that turn over quickly. The B group is what’s in between: items that are moderately priced and move out the door more slowly than C items but more quickly than A items.
2. Track all product information.
Make sure to keep records of the product information for items in your inventory. This information should include SKUs, barcode data, suppliers, countries of origin, and lot numbers. You might also consider tracking the cost of each item over time so you remain aware of factors that may change the cost, like scarcity and seasonality.
3. Audit your inventory.
Some businesses do a comprehensive count of all inventory once a year. Others do monthly, weekly, or even daily spot checks of their hottest items. Many do all of the above. Regardless of how often you do it, make it a point to physically count your inventory on a regular basis to ensure it matches up with what you think you have.
4. Analyze supplier performance.
An unreliable supplier can cause problems for your inventory. If you have a supplier that is habitually late with deliveries or frequently shorts an order, you need to take action. Discuss the issues with your supplier and find out the root of the problem. Be prepared to switch partners, or deal with uncertain stock levels and the possibility of running out of inventory as a result.
5. Practice the 80/20 inventory rule.
As a general rule, 80% of your profits come from 20% of your stock. Prioritize inventory management for this 20% of items. You should understand the complete sales lifecycle of these items, including how many you sell in a week or a month, and closely monitor those trends. These are the items that make you the most money; don’t fall short in managing them.
6. Enforce consistency in how you receive stock.
It may seem like common sense to make sure incoming inventory gets processed, but do you have a standard process that everyone follows, or does each employee receiving and processing incoming stock do it differently? Small discrepancies in how new stock is taken in could leave you scratching your head at the end of the month or year, wondering why your numbers don’t align with your purchase orders. Make sure all staff that receives stock does it the same way, and that all boxes are verified, received and unpacked together, accurately counted, and checked for accuracy.
7. Track sales.
Again, this seems like a no-brainer, but it goes beyond simply adding up sales at the end of the day. You should understand, on a daily basis, what items you sold and how many, and update your inventory totals. But beyond that, you’ll need to analyze this data. Do you know when certain items sell faster or drop off? Are there seasonal trends? Is there a specific day of the week when you sell certain items? Do some items almost always sell together? Understanding not just your sales totals but the broader picture of how items sell is important to keeping your inventory under control.
8. Order restocks yourself.
Some vendors offer to do inventory reorders for you. On the surface, this seems like a good thing–you save on staff and time by letting someone else manage the process for at least a few of your items. But remember that your vendors don’t have the same priorities you do. They want to move their items, while you should look to stock the items that are most profitable for your business. Take the time to check inventory and order restocks of all your items yourself.
9. Invest in inventory management technology.
If you’re a small enough business, managing the first eight things on this list manually (with spreadsheets and notebooks) is doable. But as your business grows, you’ll spend more time on inventory than you do on your business, or risk your stock getting out of control. Good inventory management software makes all these tasks easier. Before you choose a software solution, make sure you understand what you need, the analytics each potential software solution provides your company, and that your chosen software will be easy to use.
10. Use technology that integrates well.
Inventory management software isn’t the only technology that can help you manage stock. Things like mobile scanners and POS systems can help you stay on track. When investing in technology, prioritize systems that work together. Having a POS system that can’t communicate with your inventory management software isn’t the end of the world, but it might cost you extra time to transfer the data from one system to another, making it easy to end up with inaccurate inventory counts. Good inventory management software should:
- Help you forecast demand.
- Prevent product and production shortages.
- Prevent excess stock and too many raw materials.
- Allow for easy inventory analysis on any device.
- Optimize warehouse organization and employee time.
- Allow for multi location management, tracking inventory across several locations or warehouses.
- Reduce costs, improve cash flow, and boost your business’s bottom line.
- Keep track of your inventory in real time.
Research is key when considering a field service program, especially with dozens of options on the market. Consider using the tips listed above as a starting point to make sure you get everything you need out of a given inventory management solution. Also, consider using an integrated solution to your accounting and bookkeeping software. Smart Service (which works directly with QuickBooks) is a perfect example of how this relationship can make your life easier.