Successfully managing a small business is like walking a tightrope. You must carefully balance priorities such as spending, marketing, innovation, and the customer experience to boost profitability and grow your business.
However, on average, businesses lose up to 11% of their annual revenue due to poor inventory management, mainly through overstocking and stockouts. Common factors contributing to this loss include inefficient tracking methods, inconsistent handling procedures, and inaccurate inventory forecasting.
Maintaining optimal inventory levels at your business is key to minimizing storage costs and maximizing profit. Fortunately, there are ways your business can streamline inventory management without draining your already limited resources. Let’s walk through a few tips you can start implementing today.
1. Use cloud-based inventory management software.
Manually processing and logging items in your inventory is time-consuming and increases the likelihood of errors. Implementing a cloud-based inventory management solution enables you to monitor stock levels with the highest accuracy.
According to ThriftCart, inventory management tools are usually included in a comprehensive point of sale (POS) system, along with capabilities like customer management and sales tracking. The right platform should make it easy to:
- Barcode and label all of your inventory items.
- Track and update inventory in real time.
- Automatically sync in-store and online inventory.
- Store customer contact details and purchase history.
- Access detailed reports on revenue and past sales.
Additionally, it should come with access to a dedicated support team and use robust security measures to protect your customer data.
To select a platform that best suits your needs, read online reviews and schedule demos of your top picks to see them in action. Take this opportunity to ask the provider to demonstrate specific features you’re seeking. Consider whether the software can scale with your business, fit seamlessly into your existing processes, and integrate with your current tools.
2. Optimize your inventory space.
Whether you keep your inventory in a basement, self-storage unit, or warehouse, understanding how to make the most of available space can drastically improve workflow and cost efficiency. Follow these best practices to set up or improve your storage:
- Use vertical storage. Add shelves, racks, and stepladders to store more without taking up additional floor area. Put items in clear bins so they’re easier to identify, even if they’re located higher up on a shelf.
- Categorize your items. By categorizing everything clearly, you can reduce the time it takes to sift through your inventory and find the needed items. Your POS system should facilitate this process with barcode and labeling tools. Place high-demand items in the most accessible areas to reach them quickly.
- Map out clear walkways. Plan out obvious walkways or aisles with enough width to maneuver safely through your storage space. If you use rolling carts to transport inventory, leave enough room to move efficiently.
Additionally, consider the security measures you have in place. For example, if you store your goods in a shed, safeguard it with a heavy-duty lock and alarm system. A larger warehouse space could benefit from security cameras — at least one near the entrance. In doing so, you can be confident that your items are both accounted for and well-organized at all times.
3. Perform regular inventory audits.
As items come in and out of your inventory, you need a way to ensure that your records remain accurate and reliable. That’s where inventory audits come in. Performing audits frequently allows you to stock up and sell items without a hitch, especially if you conduct business through both a physical store and an online website.
While your POS software should make scanning and counting goods easy, a full audit of your entire inventory is still time-consuming. An alternative you can opt for is cycle counting. Using the ABC analysis method, sort your items into A, B, and C categories. Your highest-value inventory will go into Category A, and your lowest-value inventory will go into Category C. You’ll audit Category A much more frequently than Category C to save time and focus on the items that matter most.
For a simpler approach to cycle counting, your small business could instead select a specific sample of your inventory to verify for each audit. Over time, as you cycle through these samples, you’ll cover your entire inventory without requiring a lengthy full audit.
4. Get rid of dead stock.
For businesses, dead stock refers to items that are not selling and have remained stagnant in your inventory for a long time. By eliminating dead stock, you can stop wasting your storage investment on items that don’t generate revenue and clear up space for newer, more popular products.
A few common ways for businesses to get rid of dead stock include:
- Offering discounts or promotions on these items.
- Bundling dead stock with more in-demand items.
- Donating the goods to a local nonprofit.
- Presenting them to customers as free gifts to build loyalty.
- Selling the items to other businesses that may find use for them.
Many inventory management tools include robust inventory tracking and reporting features, allowing you to view data that helps you identify dead stock and deal with it promptly.
5. Analyze your inventory data.
The more you understand your customers and their expectations, the better you can adjust your inventory and marketing to boost sales. Using your POS system, monitor metrics such as:
- Inventory turnover
- Online and offline sales
- Stockouts
- Seasonal demand
By identifying patterns in item popularity and sales, you can adjust your strategy to earn more and improve the customer experience. For example, a thrift store might increase the prices on particularly in-demand products and stop accepting donations of items that are not as popular and piling up in storage.
Be patient with your small business’ journey to better inventory management — you don’t need to implement these tips all at once! Build a strong foundation by finding an intuitive POS system with advanced inventory tools. Once you’re familiar with its capabilities, take small steps toward optimizing your storage space, maintaining consistent records, and using data analytics to inform your decision-making.
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