Small businesses do not have to be at a disadvantage when it comes to managing their inventory. They can be just as prepared as the “big guys” to recover from errors that cause stockouts, backorders, and other inventory problems.. Luckily, most inventory mistakes are preventable with what we at Infoplus like to call the three magic rules of small business inventory management: don’t run out, don’t have too much, and know precisely what you do have.
So what exactly does small business inventory management look like? The specifics depend on the type of products, but real-time data, integration with the supply chain, and predictive analytics should all play a part. Small businesses can keep up with inventory by leveraging state-of-the-art inventory management software and by ensuring their processes are optimized for efficiency. By doing these things, they can avoid some of these common problems:
The Problem: Finding out that suppliers can’t fill orders is not something a small business wants to hear when their inventory is already low. Neither is discovering that items on the shelves are damaged, spoiled, or not what they thought they ordered. Being in the dark about inventory is the root cause of nearly everything on our list.
The Solution: First and foremost, a business can only fix a mistake after discovering it. Like with any crisis, quicker identification leads to a quicker resolution. The negative impact of every problem listed in this article can be avoided, or at least reduced, with inventory management software. Even small companies will benefit, especially if they hope to grow—and what small company doesn’t?
Inventory management software (IMS) helps small businesses keep track of inventory in real time. At any given time, owners can know the exact location and quantity of every SKU in their warehouse. Integration across platforms will avoid problems like accidentally promising the same item to two different customers.
When coupled with a comprehensive cloud-based warehouse management system (WMS), even more information is at a small business owner’s fingertips. They will be able to anticipate demand, communicate with partners up and down their supply chain, and even receive guidance on how to set up their space. In short, they will be able to avoid mistakes or fix issues before they reach a crisis level.
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The Problem: Supply can’t keep up with demand. Items run out, forcing a business to inform customers that their item is on backorder. Waiting for an order from suppliers for a day or two might not be too bad, but delay too long, and customers may cancel and go to a competitor.
The Solution: Ordering before the shelves are empty is the obvious answer, but it is easier said than done. Not only must small businesses know how much they have, but how quickly they can get more from their suppliers. They must also understand their customers' buying habits (more on that in #5).
Infoplus software can alert managers when inventory levels fall to a predetermined quantity. This can trigger an order to replenish that particular product, or the ingredients and materials needed to manufacture it. Integration with vendors in the supply chain can even calculate the lead time necessary to get it. Automating this process means never having to tell a customer that something is on backorder.
The Problem: Excess inventory on the shelves is the opposite of stockouts but equally problematic. Money that could be useful elsewhere is tied up in slow-moving or unsellable merchandise. SKUs with expiration dates will eventually spoil. Plus, there are carrying costs associated with anything that takes up space and resources in the warehouse.
The Solution: Small business inventory management tells managers when to order, and how much. Data-driven analytics give the information necessary to anticipate the demand. Will companies sometimes make a misstep and order too much? Probably. But using a WMS that can crunch the numbers to predict what’s coming up can avoid it happening too often. Regarding perishable items, it can help organize put-away using the FIFO method (first in, first out) so that the oldest products are the first to be picked off the shelf.
Small businesses might have to run a sale or destroy products for the immediate problem of too much of something on the shelves. The software can shine a light on when that’s necessary, or even if an item should be permanently discontinued.
The Problem: When a warehouse is a disorderly mess, it’s unclear what’s in stock and what isn’t. And if there are no clear procedures for inventory handling, employees may waste valuable time hunting for items. In this environment, fulfillment is likely to be chaotic and slow. And there is a good chance that orders that do make it out the door are incorrect.
The Solution: A robust WMS can help keep up with inventory from the moment it enters the warehouse until it is on the truck to the customer. It all starts with designing the most efficient layout for the warehouse. How the receiving, storage, packing, and shipping areas are situated is essential even for a small company. A WMS can implement ‘guard rails’ for inventory management to ensure your staff know what to do and are held accountable to follow the adopted procedures.
It is easier to keep everything in its appropriate place when the warehouse is thoughtfully organized—and when employees know where everything belongs. Designated put-away procedures will prevent staff from placing incoming stock in random locations where it might be misplaced.
WMS can also choose the best picking method and map out pick paths for quick and accurate fulfillment. Data analytics can determine which fast-moving items need to be in a forward-picking location. Adding barcodes and scanners to the mix makes it possible to track inventory quantities and locations in real-time. Managers will know what is in stock and exactly where to find it.
The Problem: Remember the Oprah Effect? Oprah Winfrey’s annual list of favorite things routinely catapulted small businesses to instant success. A celebrity endorsement or even a spot in the local media’s lifestyle section can throw a small business’s inventory for a loop. While most small brands may not have the Oprah Effect-type of overnight boom, an unanticipated spike in sales can catch any company off guard.
The Solution: Forecasting is the key to keeping up with seasonal spikes or other trends that fluctuate the demand for inventory. A WMS can analyze historical data and market trends to predict when an uptick (or downturn) will happen. Predictive analytics allow managers to stock up on (or discount) items based on actual data rather than a guess. When all goes well, a small business will not run out of snow shovels in December, or be left with dozens of them in April, either.
Social media also play a major role in a business’ fluctuation in sales. If you launch a product or a product placement, you can prepare your internal teams and inventory by using a WMS or IMS to manage an expected spike in sales.
The Problem: Small business inventory management is cumbersome—If the small business is still using spreadsheets. It makes sense that many entrepreneurs and small companies start out using manual methods, but these methods will only take them so far. As soon as sales volume picks up, or they start selling more than a handful of different SKUs, spreadsheets are not practical or helpful.
The Solution: Inventory management software is the answer for small businesses that struggle to keep up with inventory. Even those who have a manual system that is somewhat efficient can benefit from the powerful capabilities of integrating inventory with a WMS. The analytics, reports, and available alerts can help make any business more efficient. And the ability to make data-driven strategic decisions will position them for growth and success.
Running a small business depends on keeping customers happy—and that means making sure problems with inventory don’t let them down.
Making some mistakes is inevitable. Companies can lessen the impact of the occasional error—or better yet, avoid them altogether—by using the right tools to keep an eye on inventory. Infoplus IMS and WMS, along with well-thought-out processes and procedures, give business owners the tools they need to prevent a misstep from becoming a crisis.
