Top 8 inventory management techniques to enhance your business

Top 8 inventory management techniques to enhance your business

A whopping 86% of customers want to pay more for a better customer experience.

A good customer experience is the essence of any successful business, and the stat mentioned above is the proof.

However, inventory management is one of the major aspects that define the quality of customer experience.

If you often run out of stock and give negative answers to customers when they want your product, they are more likely to rate it as a poor customer experience. Hence, investing in a prime stock and inventory management app is practical and necessary.

Inventory management is not only significant for taking care of the stock quantity; it is also fundamental to reducing costs, enhancing cash flow, and increasing profitability.

There are various techniques with which any business can manage its inventory. Read further to know each one of them in detail.

1. ABC analysis In this type of technique, the inventory manager distributes stocks into three sections: ●

A: highly valuable products that contribute the highest profit

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B: mediocre products that fall between the most and the least valuable category

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C: products that make up small transactions and deliver collective profits

With this categorization, you can optimise turnover, control valuable products, improve cash flow, and administer strategic pricing.

2. Just-in-time inventory management With just-in-time (JIT) inventory management, you need to keep minimum stock, and new inventory comes in just before they are to be dispatched. You can avoid stockpiling, keep products fresh, and save inventory holding costs.

However, it is risky because if product demand suddenly increases, you might have to face a shortfall and customer dissatisfaction.

3. Six sigma practices Motorola Inc. developed a quality-control methodology, six sigma, in 1986. It is an efficient technique to minimise errors and increase working speed. It focuses on cycle-time enhancement and reduction of errors at levels not more than 3.4 times per million events.

You can use this method in shipping or picking up, and order and supply chain management.

Hence, you can increase profits and reduce unimportant stock levels.

4. First in, first out (FIFO) principles First in, first out follows the principle of selling the oldest stock first. It is among the most beneficial procedures if your products are perishable. Moreover, it is also followed strictly in pharmaceutical industries.

However, you must construct a warehouse to facilitate this inventory management technique. You will need to keep rotating stock by sending the new stock to the back of the warehouse.

Though the Last in, first out method works for a few industries, FIFO is a more widely used order management process and beneficial.

5. Bulk shipments Bulk shipment involves the transport of products in large quantities. They are generally not packed and directly filled in the transport vessel. This management approach helps save money and facilitates faster product transportation.

Bulk shipments are beneficial for businesses with constant product demands, the majority of in-house production, and the facilities to handle sudden product requirements.

6. Demand forecasting Demand forecasting, also called sales projections, helps people comprehend the number of products they should have on hand every time to fulfil clients’ requirements.

It utilises a predictive analytical method to foretell the probable changes in customer demand in the near future. Established businesses rely on historical data and newbies on industrial research.

7. Inventory audit As your inventory relaxes in the warehouse, you must not forget to visit it regularly.

Calculating how much stock you have on hand guarantees accuracy.

Often simple strategies like counting stock on your own might work. However, it might also require third-party audits time and again. They help discover shrinkage and ensure that your stock levels are perfect every time.

8. Minimum order quantity (MOQ) Vs. Economic order quantity (EOQ) MOQ concentrates on keeping the least possible amount of every product type a vendor is ready to fulfil. Costly items have low MOQ, while cheaper items have more MOQ. EOQ comprises inconsistent costs like production, raw materials, and fluctuating requirements. It benefits organisations who want to maintain low prices by buying maximum quantities of products. Hence, minimise reorder.

Conclusion Inventory management is the basic requirement of any business that aspires to grow.

However, irrespective of how robust your inventory management technique is, you lose it all if you do not use an efficient and flexible stock and inventory management app.