Whether you’re an online retailer, brick-and-mortar retailer, or both - inventory management is key to running a successful, profitable business. In this blog post, we explain exactly what inventory management is, why it’s important, and the various techniques and systems businesses use to manage their inventory. We will also explain how our inventory management software can make managing inventory easy.
What is inventory management and why is it important?
Inventory management is all about controlling the amount of inventory you have. This could be anything from finished stock, to raw materials or the components needed to make a final product.
Although this might seem simple on the face of it, managing inventory is actually incredibly complicated, as there are so many variables that must be planned for in order to effectively manage stock levels. Here are just a few variables that make inventory management challenging:
The above are just a handful of examples that illustrate why inventory management is so important to businesses, as having the right stock at the right time can mean the difference between success and failure.
What are the different types of inventory management systems?
There are many known techniques for managing inventory effectively. Which method is right for you will depend on your business and what it is that you hold stock of. Below, we explain some of the most popular inventory management techniques.
The ABC Analysis method is a simple way of grouping your inventory into three categories; A, B and C. Essentially, high-value inventory is classed as A, and would be closely controlled. B inventory would be of moderate value and so would be moderately controlled, with C items requiring minimal inventory control due to their lower value.
Depending on your business, VED may be a more suitable method of inventory management than ABC analysis. ABC prioritises the value of inventory, whereas VED prioritises the importance of inventory (since your most valuable inventory may not be the most business critical). V = vital, E = essential and D = desirable, so this system works by grouping inventory into those categories and then managing each group accordingly.
Fast, Slow, Non-Moving
For other businesses, how fast-moving the inventory is will be key to managing it. Some businesses will arrange warehouse stock in order of how frequently it’s needed to improve accessibility and efficiency.
JIT (Just In Time)
The Just In Time inventory control method is designed to keep excess inventory to a minimum. This is to save on the costs of storing the inventory (i.e. insurance and renting or owning more warehouse space than you need). However, the nature of JIT means it needs to be closely managed with lots of time spent planning and forecasting. Any delays may also result in items being out of stock and unexpected falls in demand can mean that space runs out and inventory must be destroyed or moved on at a cost.
Material Requirements Planning (MRP)
Material requirements planning is a simple and widely used method of managing inventory. The MRP method sees businesses plan inventory based on sales forecast data.
Minimum Safety Stock
Many businesses prefer to hold a minimum amount of inventory at all times to avoid being completely out of stock of any products. This may be popular with some businesses which rely on a certain component for the manufacturing process, or with retailers of products that are difficult to forecast demand for.
Many businesses use a combination of techniques alongside minimum safety stock. For example, a car manufacturer would tend to work with Just-In-Time management of inventory, but if there is a delay in lead time for the delivery of parts, this could cause production to grind to a halt. For this reason, a manufacturer may have a minimum quantity of various components in-stock to avoid delays.
Economic Order Quantity (EOQ)
As mentioned above, the prices of raw materials and components can often fluctuate based on global issues (COVID, recessions, natural disasters and more). The EOQ model prioritises lowering overall inventory costs. Sometimes, this may mean ordering a full container, rather than half a container as the storage costs are lower than the shipping costs. Or, if storing the inventory is expensive, then it may mean ordering less in more frequent batches.
What is the best inventory management software?
Whether you’re adopting one or more of the above inventory management techniques, the day-to-day reality of ensuring that everything runs smoothly can be daunting. With so much forward planning and forecasting to be done - not to mention the odd curveball thrown by a natural disaster, recession or turbulent political landscape - it’s advisable to use inventory management software in order to bear the brunt of the day-to-day tasks.
At StoreFeeder, we offer our clients the very best inventory management software. Our bespoke software integrates with your website, its payment gateways and delivery partners to offer an end-to-end solution. Armed with all of the information and data you need, you can know exactly how much inventory you have of any product or raw material at any time of day.
Our software is the best inventory management software because:
Instantly pull reports across all products, channels, stores and more. Our software also pulls live sales and stock information from sales between online marketplaces, such as Amazon and eBay, as well as your own website - so you can easily manage stock.
Multiple warehouses? No problem. Our inventory management system allows you to manage stock across multiple stores or warehouses.
If you’re using a Just In Time, Minimum Safety Stock method or similar, then StoreFeeder software can automatically generate requisitions based on sales. These requisitions can then be quickly converted to purchase orders.
StoreFeeder’s scanners are easy for your employees to use and also support multiple barcode types (including Barcode, UPC, EAN, ISBN), as well as multiple barcodes assigned to a single product.
Whether you sell individual products, kits or variants, StoreFeeder can make managing these products simple. No matter how complex your kit or variant options, the correct corresponding inventory levels will be updated.
Whatever inventory you have, from finished products to components or raw materials, our software allows you to easily add custom attributes to products and categories and manage list and sale prices.
For a free demonstration of StoreFeeder’s inventory management software, book a demo today.