For SMEs to thrive, proper inventory management is key. This means achieving the delicate balance between having enough stock or materials to meet demand yet not so much that it loses you money or overflows your self-storage facility. As many small business owners keep their stock at home, storage is a key concern. These tips for inventory management will help you organise your stock, while tracking orders, deliveries and demand.

What is inventory management?

An integral part of supply chain management, inventory management helps SMEs maintain optimal stock levels. When done successfully, it ensures that products are always in stock when customers want to buy them, thereby maximising sales and efficiency. At the same time, it reduces the risk of holding excess inventory, and thereby prevents funds being tied up in unsold stock and unnecessary storage. This improves cash flow and, ultimately, boosts your bottom line.

How is inventory management done?

The best way to manage inventory is to use software that tracks your deliveries and sales in real time, often using barcodes. This way, you can monitor stock levels and place orders in good time – some software can even automatically trigger orders in response to sales. By analysing which products sell well, both throughout the year and by season, you can forecast sales and strategically plan your stock levels. Some businesses may need to consider the sell-by dates of perishable items or availability of storage for large items.

Step 1: Organising your inventory

Organising and categorising your products is the first step towards successful inventory management. It helps to use clearly labeled shelves, racks or drawers so you can see what stock you hold and access it easily. The 80/20 rules predicts that 80 percent of your revenue comes from just 20 percent of your items. Your best-selling inventory (the ‘20 percent’) should be stored somewhere that is easily accessible. When new stock is delivered, it should be placed at the back to ensure older items are sold first. This is known as the FIFO approach (“first in, first out”), which helps prevent stock from perishing or becoming damaged over time in storage.

Step 2: Managing your inventory

Inventory management software is the best way to manage your stock. By assigning a unique barcode to each product, you can scan items in when they are delivered and out when they are sold. The software will then keep track of your sales and stock levels. Even with this software in place, it is important to carry out regular audits to ensure your actual stock levels match what you have on record. A full, physical stock take should be carried out at least annually, with more regular audits and quality control checks on best-selling items throughout the year.

Step 3: Tracking your inventory

Tracking your inventory levels helps ensure you maintain the right amount of stock. In e-commerce, it also helps you to display accurate stock levels on your website, which builds customer trust and drives sales. Opt for cloud-based inventory management software with real-time sales tracking to help with this. Such software can be linked with your POS to track both online and in-person sales as they occur. You should prioritise your most expensive items, as you are likely to hold fewer of them in stock at any one time – if you handle a lot of products, it is advisable to categorise them into price bands.

Step 4: Forecasting demand

To maintain optimal stock levels, you need to predict demand. Many factors must be taken into consideration, including historical sales figures, seasonal trends, market trends, planned promotions and even the state of the economy. Once you have identified which products are most popular, and when, you can tweak your stock levels to match demand throughout the year. Inventory management software often has inbuilt analytics tools that help with this process.

Storing your SME’s inventory

Even with good inventory management, your business storage needs are likely to outgrow your spare bedroom or HDB bomb shelter. When you eventually run out of space, renting a storefront or warehousing can be pricey, especially when you’re just starting out. That’s where self-storage units come in. Book now with Space Next Door!