One of the most critical parts of any supply chain is inventory management, yet it has only been in the last decade or so that companies have begun to realize just how much an effective inventory management has an impact on cash flow and company success. By establishing these four policies related to inventory management, your company can improve cash flow, minimize shipping errors and keep better control of the inventory you have on hand.
Employee Access Policies
Probably the biggest issue facing companies that must stock inventory is the human factor that can lead to problems with inventory. One way to address this issue is to designate who has access to what parts of the system. Require that a manager verify all returns, discounts or voids and ensure that only inventory control personnel are permitted to move inventory from the warehouse to the storeroom or showroom. Limit who may enter items into inventory as well. Require that all sales be entered through the point-of-sale regardless of how busy the salespeople may be. When possible, enter all merchandise into inventory using a barcode scanner and not by keying in information.
Perform Frequent Audits
To be sure that all employees are adhering to policies, perform frequent audits. One way to keep an eye on inventory is to perform cycle counts which allow you to double check inventory numbers without doing a full-scale inventory audit. In cycle counting, you choose inventory from a certain location, count it, then compare it to data in your live inventory. Run reports as often as possible to see what items are moving and which items are not. Reports can provide a significant amount of information, including what salespeople are performing well, what promotions are working and help to identify inventory that is not moving.
Minimum Stock Alerts
Set minimum stock alerts that will let you know when certain inventory has dropped below a certain level. This will let you know when you need to order additional stock and can also keep you advised as to what stock is moving better than others. Remember to account for transportation time when setting the reorder minimums so that you are not out of stock and waiting for a delivery to arrive. Don’t wait until the pallets or shelves are almost empty before placing an order for the product that is selling quickly or you risk your customers finding the item through a competitor who has set good minimum stock alerts.
Maximize Your Space
One of the greatest ways you can maximize your warehouse space is to have a great floor plan and supply design that allows you to safely store as much product as possible. When organizing your space, think about having shelves go as vertical as is safe, and have as narrow of aisles as is practical. Narrow aisle forklifts from places like Arpac Storage Systems Corp let you keep shelving more snugly than in the past. If you feel like you need floor plan advice, many warehouse technology companies can help you out.
Keep It Simple
The most important policy for inventory management is to keep your controls as simple as possible. Be sure that your ordering and restocking policy is refined so that products that are selling well remain in stock, yet those that may be moving slower are not filling your warehouse. Inventory that is not moving is costing you money in overhead, storage and auditing time. Therefore, your inventory control system should be sophisticated enough to let you know what items are not moving, but simple enough that the steps can be performed in a minimal amount of time.
Good inventory policies will help your company grow, improve your bottom line and help your employees better track how products are moving.