Tips to Manage Inventory
Do you have difficulty in managing inventory? Don’t you manage to track the goods you are buying and selling after that? Aren’t you aware which time to order items, or are you unable to maintain your stock in safe condition? The following tips may be helpful for you.
1. Keep track: This is the most important task in order to manage your inventory. You need to keep records in a systematic manner. If you do not have an account of your sales volume, as well as your current stock level, you will never know when and how much to reorder. It is recommended that you keep an ordering period, that is, a time frame after which you will make your next order. Your tracking should be based on this unit of time. You can track each item in the following manner:
Average Sales: How many articles do you think you will sell during a particular time frame (ordering period)?
Maximum Sales: What is the maximum quantity that you think you will sell?
Bulk Order Quantity: How many articles do you need to order in bulk at one time?
Order Lead Time: From the day you have placed the order, what is the time taken to receive the shipment?
Quantity On Hand: How many articles do you presently have in stock?
Quantity On Order: How many articles have you presently ordered for?
The above data can be stored on an Excel sheet and constantly updated. So, instead of clearing up items that you now consider as junk, it is better to be organized.
2. When to Order: Once you are aware of how many items you have in stock, and which items are running out, you need to know when to make a reorder. First, decide on the ordering period, that is, after how long you will make a reorder. It could be weekly, monthly, or bi-monthly. You should ensure that you maintain a minimum stock level at the end of the present ordering period, which is enough to carry you through till the next ordering period.
How do you know it is time to reorder?
Add the quantity of items that you already have (Quantity on Hand) to the amount that you have ordered for (Quantity on Order), which is temporarily called Quantity Available.
Now, you will still be selling until the fresh stock arrives, so subtract the Lead Time Sales from the Quantity Available. If this amount is less than the minimum stocking level (Time Lead Sales minus the Safety Quantity), it implies that you have to reorder. This final amount is termed as Quantity Available.
How do you know how much to order?
Subtract the Quantity Available from the minimum stock level.
Take a note of few terms related to stocking:
Safety Quantity: Average Sales is subtracted from Maximum Sales. This quantity is the minimum quantity of items that you have when there is more sales than the usual amount.
Time Lead Sales: The Average Sales multiplied by the Order Lead Time.
3. Quantity on Hand: It is always recommended that you physically check your inventory just to ensure that the data in your software matches up to what is really there. This allows you to make adjustments in the case of unexpected losses, which can happen owing to theft or breakage. If these losses are not accounted for, keeping track using your software will be futile.
Note that if your ordering period is long, you need to have enough inventory in stock. However, be sure that there is not too much inventory for fear of the products perishing or crossing their expiration date. Besides, you will be investing more capital and covering insurance and management costs.
4. Sell Junk: One way to get rid of inventory that you feel is junk is to sell it to a vendor. You will not only be clearing out unwanted stock, but you will also not suffer a complete loss.
5. First In, First Out: If you are selling products that have an expiration date, it is recommended that you clear the older stock first. In other words, put the items that have a later expiration date behind the ones that will expire shortly.
6. Security: Ensure to keep your inventory safe from staff members as well as outside intruders. Stock that is more valuable than others need extra security and should be delivered to a safe place. Make sure that your staff is trained to look out for thieves, who usually work in groups.