Inventory management is the process of procuring, storing, and selling a company’s inventory. The term inventory in this context is from raw materials up to finished products. This post will help you understand inventory management best practices to run and manage an efficient and effective warehouse.
Here are six inventory methods and practices to help optimise the warehouse processes.
Optimising Picking and Packing Process
Picking and packing is the process of identifying inventory to fulfil a customer order and preparing it for shipment to the customer.
Different organisations adopt a different set of procedures to fulfil customer orders quickly and efficiently.
- Design the warehouse for efficiency by placing top-selling items closest to the packing station
- Remove clutter and keep the warehouse well-organised
- Invest in warehouse management software to create a picking list and update the inventory.
Establish Your Inventory KPIs
KPIs help measure the performance, and as the famous saying goes, what does not get measured, does not get done! Here are a few inventory KPIs you should understand and focus on:
- Inventory holding cost is the total inventory cost such as warehouse rental, salaries, shrinkage, insurance and other overheads.
- Inventory write-off refers to the recognition of the inventory that is obsolete, stolen or lost.
- Inventory turnover rate – is the rate at which the inventory is sold and replaced.
- Order Status and Tracking – it’s the process for efficiently tracing goods along the distribution chain.
- Fill rate is the percentage of the customer order met without running out of stock or lost sales.
Automating can help with keeping this information at your fingertips if you need to access it quickly.
Have an accurate Reorder Point
A reorder point is when the inventory dips below the lowest amount of stock you need to carry, triggering an order for more stock. With adequate stocks to fulfil customer orders, you can sell better with the proper inventory each month.
Maintain Safety Stock
Safety stock is an adequate amount of inventory to be kept on hand to manage the variability in market demand and lead times.
Adequate safety stock inventory will help you tide over:
Prevention of stockouts
Safeguard against inaccurate demand forecasts
Safety against unpredicted spikes in demand
A buffer for exigencies and longer lead times
Optimise lead times by analysing sales data and reducing minimum order quantities (MOQs). Also, reduce inventory holding costs by monitoring obsolete or slow-moving stock and offering a discount.
Invest in a software solution
You can optimise your inventory management by deploying inventory management software. It will streamline your stock audit, reduce manual work and provide you with accurate data. Automation will help in efficient and accurate stocktake and other repetitive tasks which are prone to human errors.
Inefficient inventory management will block your capital to the extent of even 40% of the working capital. The above methods will help you optimise your inventory – where you have lower inventory levels without being understocked – yet have adequate growth and profitability in your business.