Inventory Management Best Practices

Tweet about this on TwitterShare on FacebookShare on Google+Share on LinkedIn


Some business authorities assert that there are a set of inventory management best practices all businesses should utilize to achieve an optimal inventory control situation. However, you might find that an inventory management system that works well for one type of company wouldn’t work well for your company. There’s not necessarily a one-size-fits-all set of inventory management practices you should follow. However, there is a goal that all companies should have when it comes to their inventory management. That goal is to minimize how much cash is invested in inventory without sacrificing what can be delivered to customers. Here are three inventory management best practices you could consider employing to help you reach that goal:

1. Start using some inventory management software. Once you have this inventory control software set up, you can figure out how much inventory you need for the demand of your products. Most inventory software will automatically calculate this for you based on the buying trends of your customers. However, it’s a good idea for you to take a look at the buying trends yourself and try to account for variables that may affect your sales. For instance, if you sell roofing supplies, and a major storm blows through town, you’ll have to adjust how much inventory you order accordingly.

2. Get the whole company involved in your inventory operations. Inventory management is connected to warehouse management, materials management, supply chain management, and pretty much the management of your whole company. You can have your sales department let you know if they expect an increase in sales and thus an increased need for inventory. You can have your customer service department alert you to any problems customers are having with the products, and you can change your inventory production practices as necessary.

3.  Do cycle counting.  Even the best inventory management software cannot make up for mistakes in data entry, lost or misplaced inventory, unrecorded product returns, or mislabeling.  It’s important to verify the data in your system on a cyclical basis.  The one-time physical inventory count at the end of the year is one way to do this, however, it generally requires a multi-day shutdown of all of your operations.  It can also introduce new errors since everything is counted and there is a lot of room for inaccuracies to work their way into places where they didn’t exist before.  Cycle counting can be much more accurate.  It’s more of an auditing technique, where sections of the inventory are counted on a cyclical basis.  The very best way to do this is to count a few items every work day, making sure to work through all items a few times a year.  Different types of items can be cycled more frequently – such as high value items or ones with longer lead times.  Small items such as fasteners may not even require counting at all.  When an error is identified – this should trigger an investigation, which generally leads to overall improvement of the entire organization.

Try out the tips above and experiment with other inventory management techniques. Through trial and error, you’ll figure out the inventory management best practices for your company and work towards a culture of continuous improvement.