When the phrase “inventory management” comes to mind, it’s most likely accompanied by a long sigh or some mumbled excuse, “I’ll figure it out next week.” Putting off managing your inventory, or choosing to neglect an inventory routine can hurt your business in more ways than one. Managing your inventory will save you time, money, and frustration!
Inventory management is defined as “the process of efficiently overseeing the constant flow of products into and out of an existing inventory.” In simpler terms, inventory management means keeping track of what you have on hand, where it is and what needs replenished.
Why Inventory Management is Important
1) Save time and money
Keeping track of inventory saves time and money when replenishing stock.
At eTech Parts we notice some customers prefer to place numerous orders on an as-needed basis, while others place fewer orders on a more regular basis. The business that relies on placing as-needed orders loses time and money with each shipping cost and every defective part, and most likely only offers next-day service to customers. The other business that prepares a weekly order spreads the shipping cost among all the parts in the order, and is fully prepared to offer same-day service to any customer. These differences in inventory renewal are due to differences in inventory management styles, and can make a huge difference in overall profit.
2) Never run out of the products you use most
Properly tracking inventory and keeping “buffer stock” on hand prevents running out of stock of popular items.
Timing is everything when it comes to inventory management; just one missing part from inventory (that you swore was still there!) can mean one missed business opportunity, which ultimately means less profit in your pocket at the end of the day. Say this happens once a week…at an estimated average of $70 profit per repair, those missed business opportunities can add up to $280 a month and over $3,000 in missed profit in a year! Having backup stock of your most popular parts can defend business against running out and the possibility of defective units.
3) Never end up with large amounts of “dead stock”
Managing your inventory prevents unused products from being reordered.
Running out of stock is one thing, but ending up with large amounts of “dead stock” is another. Managing inventory properly means acknowledging trends of use and only ordering what you need and what trends have suggested you will need. Paying attention to what you’re using, what you’re not using and what might need to be returned (if it’s still in warranty) is important to prevent unused stock from sitting on your shelves, losing value and gathering dust.
4) Prevent risks of theft or loss
Inventory management prevents sticky fingers from sticking to your expensive parts.
Having an exact idea of what parts or products are currently in your possession prevents the risk of theft or loss from affecting your business. Making employees aware that every part and product is accounted for, and notating where everything is can help the fight against sticky fingers and forgetful memories.
So inventory management is clearly important, but how does a business start on the right track?
7 Tips to Manage Your Inventory
1) Count and keep track of what goes into inventory and what leaves inventory. Notate quantity, usage and location if necessary.
2) Understand and acknowledge your usage of parts and the trends of what’s being used more/less, etc. For example, as devices become obsolete you will begin to repair fewer of them.
3) Understand shipping times, lead times, and seasons of unavailability – such as Chinese New Year, a period of time each February when Chinese factories shut down and availability of replacement parts is scarce.
4) Create an inventory routine specific to your business. Choose a day of the week to count your inventory, and a day of the week to place a replenishment order – it can be the same day or a different day, whatever works best for the business.
5) Don’t order what you don’t need. Remove less popular items from your order if you aren’t moving as many as before.
6) ALWAYS have buffer stock. Having back-up stock of your most popular parts can make the difference between losing a customer to your “same-day service” competitor and gaining another customer for life.
7) Use an inventory program. Don’t know of any good ones? No worries, we did the research so you don’t have to!
Inventory Management Programs
There are tons of different ways to keep track of inventory, but we suggest skipping Excel and putting away the pen and paper for now. Here are several different programs designed to help keep track of inventory, for businesses of all different sizes.
inflow – $299-$499
Pros: Free software option, offers complete product history, photo upload capabilities, easy to use, free customer support
Cons: Not compatible with Mac OS
Inventoria – $99
Pros: Bar code scanning capabilities, note and photo uploading, creates POs for vendors, fairly easy to use
Cons: Requires purchase of separate customer support plan, does not support multiple languages
FileMaker – $299-$1,799
Pros: Mac OS compatible, cross-platform software, iPhone/iPad compatible, free trial available
QuickBooks – $249-$999
Pros: Several options for businesses small and large, cross-platform software, monthly payment options, tracks several aspects of business
Cons: Expensive for inventory purposes
PartKeepr – Donation Only
Pros: Perfect for electronic parts stock, niche tool, simple to install, open source, runs on Linux, available for free/small donation, forums for troubleshooting, demo available
Cons: Lacks full CRM (Customer Relationship Management) or ERP (Enterprise Resource Planning), can be difficult for some to learn
Managing inventory may seem like an impossible workload for an already busy business owner but it doesn’t have to be! The hardest part is simply taking the time to develop an inventory management system that works for your company. Beyond that, sticking to a routine of counting and updating the system is a breeze and takes less time than one might think. Once you get the hang of it, inventory management will be just a small aspect of doing the job you love.