The Ins and Outs of Inventory Management

Never wonder if you're managing your inventory efficiently again. Dig into why excellent inventory management is essential to streamlining your warehouse operations.

The Case for Inventory Management

Poor inventory management leads to unmoved stock, a lack of insight into what you have, a mismatch between shopper demand and warehouse supply... ultimately, it leads to money tied up in the wrong items, creating waste.

On a basic level, what's the purpose of inventory? It comes down to delivering the right product to the customer that ordered it. So in our experience, the goal of inventory management is to make it as easy and as efficient as possible to get that product to that customer.

Bad inventory management is a huge obstacle to achieving that goal. If you don't keep the right products in your inventory, you'll constantly find your high-velocity SKUs out of stock, which leads to delays, backorders, and unhappy customers. And you'll have too many of the wrong things — or dead stock — which means you'll be wasting space (and money) on unwanted items, many of which might expire or depreciate quickly.

Poor inventory management can disrupt warehouse management, too. The less control you have over your inventory, the worse your warehouse will perform. The same is true of accurate data for inventory certainty: discrepancies in stock can cause costs to spiral, errors to go unnoticed, and incorrect data predictions.

On the other hand, when you have the right tools to manage your inventory well, it can accelerate your picking, help you gain insight into your fast and slow-moving SKUs, and streamline your floor operations.

Learn the 3 Magic Rules for Smooth Inventory

Basically, inventory management comes down to walking the line between too much and too little. The best way to do that? Know exactly what you have, and where it is, at all times.

There are three crucial rules for any warehouse manager when it comes to inventory:

1. Have enough (don't end up in a backorder situation)
2. Don't have too much (avoid an overstock situation)
3. Know thy inventory

Now, these rules seem pretty self-evident — but they're not always easy to follow. With a bit of upfront work, though, they are achievable: we've honed them over years of experience at Infoplus.

For Rule #1, the key is planning ahead and predicting trends. In the past, customers would have been fine to wait out a backorder of inventory due to high demand. That's no longer acceptable. Now, it's 24-hour delivery or bust. (And there's usually a competitor with a passable alternative available quickly if you're in eCommerce.) So you have two approaches to avoid the situation:

• Set up automated low stock notifications, particularly on popular items
• Forecast shopping trends with the most accurate data possible to have the right stock on hand

Rule #2 deals with overstocking your inventory. A high volume of low-velocity SKUs is a waste of money you may not see again. The best approach is to run as close to the low stock line as possible, using Rule #1 techniques to avoid drastic consequences.

To make all that work, you need Rule #3: Have accurate inventory data. Exactly how much do you have, and what state is it in? What data are you basing trends on? Real-time, comprehensive data is the key to making these rules work for you.

Watch for These Common Mistakes Along the Way

One major mistake is falling on the wrong side of the "amount" tightrope. To keep a balance between high and low-velocity inventory, you must think about your workflow from start to finish.

Let's say you're starting to figure out the whole "how much should I stock" equation. It's time to iron out a few other common mistakes.

1. Make sure you're not disrupting the workflow of your warehouse, as it relates to inventory. Receiving, picking, and shipping can't be done without inventory, so your management process at one end will eventually affect the other.
2. Analyze any process mistakes. Are you trying to retrofit your new approach to stock management into an outdated inventory management process, or are you taking advantage of industry-leading tools like barcode scanning to speed up your count cycles? Incorporate automation to ensure your new processes are gathering consistent data in an efficient way.
3. Make sure you're using the right analytics. Use the right type of data — from order velocity to sales-t0-inventory ratio — make informed decisions about your warehouse inventory management. 

The point here is inventory management upgrades aren't just about the end goal of stock balance or efficiency. Make sure each new process fits into your inventory workflow along the way.

Check out this infographic  for a detailed look at some common Inventory Management mistakes and how to fix them.

Tune Up Your Inventory Management

Now that you've identified and optimized the common mistakes in your warehouse, you can take inventory management to the next level. That means revamping inventory best practices in your warehouse, like receiving, picking, and shipping methods, for unprecedented efficiency.

A few options to get you started include:

1. Rethinking how you store your inventory, such as grouping items that are sold together or pulling forward high-velocity items — forward picking — that move quickly
2. Analyzing key data trends like seasonal item velocity, whether that's holiday cookware or inflatable pools
3. Integrating all your platforms for the richest possible pool of data
4. Tracking supplier data to inform reliability and provide your own (accurate) shipping estimates
5. Using mobile devices on the warehouse floor to get on-the-ground inventory data