“Inventory management” tends to be a big buzz word in the world of business, and for good reason. Properly managing your inventory is a tall task, but it’s one of the most important things you can do to keep your business running smoothly at all times. If you over-or understock a product, if you aren’t sure how much you’re spending on your inventory, or if you don’t have the items in stock that your customers are asking for, any of these scenarios can lead to big trouble for your company.
Since inventory management is such a huge part of your business, it’s important to understand the concept completely. Here, we’ve outlined what exactly Inventory management is, why it’s important to your business, and what kind of system you can put in place to ensure that your inventory is properly tracked and managed at all times.
Defining Inventory Management
So, what is inventory management in the first place? The definition is actually pretty self-explanatory on the surface: It’s the process of managing your inventory. However, though this might sound simple, the individual steps that go into inventory management can get a little complex.
Inventory management is not as simple as keeping track of your stock levels every day. It also involves additional business processes like forecasting demand to properly adjust your inventory levels throughout the quarters, ensuring that you have the proper amount of space to store all of your inventory, keeping good business relationships with your vendors to make sure that you can obtain inventory quickly and affordably, and more.
As you can see, Inventory management is a pretty big job, and it’s hard to keep track of everything when you’re doing it manually. A small business run by a single entrepreneur or a handful of people might be able to handle inventory management on its own, but as a business starts to grow, the appeal of an inventory management system only increases.
Now that we know what inventory management is, we can start to discuss why a proper inventory management system can benefit your business. Adopting an inventory management system that works for you can actually benefit multiple aspects of your company, including:
- Improved customer service
- Greater cost-efficiency
- Better planning and data visibility
- Maintaining ideal inventory levels
- Fewer time-consuming manual tasks
- Improved Customer Service
If you’ve ever shopped online (read: all of us), you know the importance of good customer service. If the business that you are shopping from doesn’t have a sufficient inventory management system, they may wind up being sold out of a product that you really want for months on end, effectively losing your sale. You might have run into a situation where you are unable to track your package once it leaves that business or you place an order for a product only to find out later that the website was inaccurate and the product is actually unavailable.
However, having a solid inventory management system can help eliminate many of these problems. You’ll be able to identify when you are running low on an item so that you can reorder in a time-effective manner, you can give your customers accurate tracking data after their products leave your warehouse, and overall, you can build a sense of trust with your clients, which goes a long way towards getting repeat business.
- Greater Cost-Efficiency
Some business owners think that the more inventory you have, the better. But that’s not always the case, and more often than not, it wastes more money than you might expect. If you’re stocking a product that hasn’t been selling well for a while, you could be paying extra for valuable storage space while those pieces simply collect dust on your shelves. A good inventory management system can help you determine which products are not moving, come up with sales or promotions to get them off your shelf or reduce your storage space to save money.
Another way that an effective Inventory management system can help you save money is through man-hours. Managing all of your inventory by hand can be incredibly time-consuming, and as long as an employee is spending their shift figuring out your inventory levels, you’re paying them for that. If a mistake is made and something has to be corrected, that’s just more time and money or wasting. However, an automated Inventory management system allows you to put your employees on other, more important tasks, and it eliminates the potential for human error.
- Better Planning and Data Visibility
As a business owner, it’s incredibly important to be flexible with your inventory. Perhaps an item only sells well in a certain season, or maybe you’ve heard feedback from your customers that a certain item is overpriced. Your inventory management system can provide you with accurate reporting that allows you to better plan for future orders and adjust your sales methods to get products off the shelf.
The longer that you are able to use an inventory management system, the more accurate your results will be. For example, you might find that one item sells particularly well in the summertime. If that only happens for one year, it doesn’t necessarily point to a trend, but if the same thing occurs five years in a row, you might be onto something. An effective inventory management system is one of the best ways to identify these trends without spending hours and hours doing your own research.
- Maintaining Ideal Inventory Levels
Finding the perfect inventory level for each item that your company sells can be an overwhelming task, but it’s incredibly important to strike that balance. If you have too much of a certain item, you might find yourself wasting storage space or having to come up with a discount to get those pieces off your shelf. On the other hand, if you have too little of an item that’s in demand, your customers could become frustrated by long wait times or inaccurate tracking information.
An inventory management system can work wonders here, as it will be able to accurately determine the ideal inventory level for any given item. Many inventory management systems will even alert you when you are starting to get too low on a product so that you can reorder right away. All of these complicated calculations are done without any extra effort from you, allowing you to be seamlessly in control of your inventory at all times.
- Fewer Time-Consuming Manual Tasks
Finally, each of the points that we have made above can be culminated in this final benefit: fewer time-consuming manual tasks for you and your staff to have to worry about. Think about every individual step of the inventory management process, then imagine you had to handle all of them on your own or pay an employee to cover them. This scenario would result in an incredible waste of time and money, especially when your business is growing or when errors arise.
Companies big and small are constantly looking for ways to decrease their costs and improve their bottom line. While inventory management software is an investment, it’s one that is certainly worthwhile. You’ll be able to automate a wide range of tasks that allow you to spend your energy on the aspects of your business that you’re truly passionate about, leading to better morale all around and a faster-growing business.
Selecting an Inventory Management System
Have we convinced you that it’s time to invest in an inventory management system? Don’t get too eager and go out and purchase the first software that you come across. There are a few questions you can ask yourself before you start your search for the ideal inventory management system that will make the journey a lot easier.
First, consider how much money you are willing or able to spend on an inventory management system. As we mentioned, obtaining an inventory management system is often an investment, but it’s more than worth it. Setting a reasonable budget for your new system is a great way to narrow the playing field right away since you won’t be tempted to look at options that go past your budget. When you’re setting your budget, make sure to account for the money that you’ll be saving on man-hours, excess product, and the like.
You’ll also want to consider how big your business is. Many inventory management systems are intended for big businesses with multiple warehouses, but a small company that’s just starting out might not need all of those fancy features. Try to select an inventory management system that works for you at the moment but still has the potential to grow as your business does.
Finally, consider the benefits of a cloud-based solution versus on-premise software. If you travel between multiple warehouses or locations, the cloud-based option will probably work best for you; however, if all of your business happens in one place, you might be able to get away with an on-premise deployment strategy.
Power Up Your Business With DEAR Systems
While inventory management is a huge part of your business, it’s not the only thing that you should be keeping an eye on. One of the best ways to have all of your business information in one place is by investing in a cloud ERP software like that from DEAR Systems. We are proud to work with clients from around the world to help them keep track of their purchasing, sales, manufacturing, e-commerce, and many more aspects of their businesses. To learn more about our cloud ERP software Contact Us today or Get Free 14 Days Access.