Whether your business is just starting out or has been in the market for quite some time, it is important to keep a track of the key performance indicators (KPIs) as they can help ensure that you are on the right track. One of the most integral parts of managing a business is driven by important inventory management KPIs.
Effective inventory management is the foundation of any product-driven business. In theory, it sounds quite simple; keeping your inventory levels in control by knowing how much you already have at hand and evaluating how much more you need.
But in reality, it is not as easy as it sounds. When your inventory management is faulty and out of control, it can affect the core functions of your business in the form of supply shortages or oversupply. The fine line between these two is what is know as effective inventory management.
In this article, we break down the concept of inventory management entirely, discuss some tips to improve inventory management, and also explain how to select the right inventory management software for a small business.
What is Inventory Management?
In simple terms, inventory management refers to how you track and control your business’ inventory as it is bought, manufactured, stored, and sold. From purchasing raw material to selling finished goods, the inventory management process governs the entire process to ensure that you have the right quantity of the right item at the right location and time.
The purpose of inventory management is to ensure that the inventory is consumed as effectively and efficiently as possible. By properly managing your inventory, you can ensure that your customers’ desired products are never out of stock. Moreover, inventory management can also help in avoiding oversupplying so you can use the same funds for a better purpose instead of tying them up in excess stock.
How Does Inventory Management Work?
At a basic level, inventory management involves controlling and tracking stock as it is purchased from suppliers, manufactured in your facility, stored in the warehouse, and then finally handed over to your customers.
The inventory management process can go as deep as needed, depending on the size and nature of your business. It can include sales forecasting, differentiating between dependent and independent demand, and more. But at the end of the day, it all comes back to your stock and related components.
Key Stages in the Inventory Management Process
The inventory management process involves tracking products, raw material, and other supplies across the entire chain that consists of suppliers, production department, and sales team, with an end goal of providing a smooth and seamless experience to your customers.
There are five main stages of this process:
- Purchasing: Depending on your business model, this can mean buying raw material for manufacturing goods or purchasing finished goods directly for reselling.
- Production: This involves producing finished goods from raw constituents. It is relevant for manufacturing businesses only. Wholesalers, for instance, might skip this stage entirely.
- Warehousing: This stage can include both storing your raw materials before they are used in manufacturing, and storing finished, manufactured goods before they are sold.
- Sales: This involves handing over the goods to your customers in exchange for payment.
- Reporting: This refers to calculating sales and revenue, and also knowing how much money the business makes on each sale
Tips to Improve Your Inventory Management
Here are some effective inventory management tips for small businesses:
- Sort out your inventory: Finding products in a warehouse full of goods can be a daunting task. It also makes it difficult to calculate inventory levels of different products individually which, in turn, makes inventory management very hard. Therefore, it is imperative that you label and sort out your inventory. Use different labeling and shelves for different products.
- Use the FIFO (first in, first out) approach: FIFO is the most practical approach for small businesses. Ideally, goods should be sold in the order they are bought or manufactured, as this decreases the chances of spoilage and obsolescence. The best way to apply FIFO in your warehouse is to stock the products in the order they were received i.e. newer goods at the back and older goods at the front.
- Fine-tune your forecasting: Most of your business decisions, including how much inventory to produce/order, depend on projections. Thus, accurate forecasting is essential as it will help you prevent understocking and overstocking problems. Use your historical sales figures, predicted growth rates, market trends, overall economic situation, etc. to forecast your sales.
- Identify your best-selling and slow-moving products: If your business manufactures/sells multiple products, it is highly likely that you have both best-selling as well as slow-moving items. For effective inventory management, you need to identify which items are almost always sold out and which ones are difficult to sell so you can focus more on your best-selling products and come up with strategies to clear out the slow-moving stock.
- Use a cloud-based inventory management software: Managing your inventory on an ad-hoc basis will work for a short time but as your business grows, you will need a proper inventory management system. Order Circle offers innovative inventory management solutions for small businesses with next-level features to help you manage your inventory effectively and efficiently.
About OrderCircle’s Inventory Management Software
Order Circle is a B2B company that offers innovative solutions for wholesale businesses. From inventory and order management to customer branding and analytics, Order Circle takes care of all the key aspects of wholesale businesses so you can sit back and relax as you watch your business grow into an empire of its own.
OrderCircle’s inventory management software is designed to help wholesale businesses in keeping their customer catalog organized. We’ll keep your stock levels under check in the back end with online synchronization across all the sales channels to help you in predicting the stock requirements over both the short-term and long-term.
Here are some distinctive features of our inventory management software:
- Item Catalogs: OrderCircle offers an efficient customer portal for small businesses to showcase their products. All you need to do is upload the items on the portal once and it will get updated automatically. Through the portal, your customers will be able to view custom prices, discounts and other features agreed between yourself and them, thereby providing a more personalized experience for every customer.
- Inventory Management Notifications: With OrderCircle’s inventory management software, you can keep track of the available inventory for every SKU. Inventory will be deducted in real-time as orders are placed, which mitigates the chances of customers being left disappointed with delayed/canceled orders. Our Shopify integration offers automatic sync for inventory level, so your customers can easily view what you have in stock.
- Bulk Upload: Adapting to a new inventory management software has never been easier! With OrderCircle’s innovative bulk upload feature, you can easily upload your existing sheets on the OrderCircle portal in one go. You can also import your current line sheet and create our item catalog in seconds for your customers to start ordering immediately. The portal can also be integrated with your Shopify store, so you can connect it to your existing store for a seamless experience.
- Stock Adjustments: With OrderCircle’s inventory management software, you can adjust (either increase or decrease) the stock levels for single or multiple products with just one click. Adjusting stock levels can help you understand the exact amount of inventory available to your customers after the stock levels have changed because of new stock intakes, inspections, sales, and more.
OrderCircle also offers a user-friendly dashboard from where you can view and control all the important aspects of your wholesale business, including your orders, customers’ list, important documents, and more. The dashboard is available in the mobile application as well so you can track your orders and keep in touch with your business on the go.
Why Choose OrderCircle?
At OrderCircle, we treat your business like our own. have a customer-centric approach and are constantly improving our service to offer your customers a smooth and seamless experience with an end goal of turning them into your permanent customers.
By choosing OrderCircle’s inventory management software, you get a business tool that will:
- Help reduce costs and improve cash flow, and give a boost to your business’ bottom line
- Keep track of your inventory in real-time
- Help you forecast sales and demand
- Prevent product and production shortages
- Prevent overstocking and wastage of excess raw material
- Allow for easy inventory analysis on any device through the dashboard
- Allow for multi-location management i.e. tracking inventory across several locations or warehouses
- Be accessible right from your retail point-of-sale
In simple words, you get an all-in-one software that will take care of your inventory management from A to Z!
Before You Proceed…
Here are some frequently asked questions that will clear any doubts or confusions you might have:
- I have just started my business. Do I need inventory management software?
If your business is in its initial stages, then you might not feel the need to use inventory management software. However, as your business grows, inventory management will become more complicated and difficult to carry out manually. Therefore, we recommend that you save yourself the hassle and use OrderCircle’s inventory management software for small businesses from the beginning. Plus, we are offering 50% off for a limited time period and you certainly would not wan
- Can’t I just use spreadsheets for inventory management?
Spreadsheets are the least efficient way to manage your inventory as they need to be updated manually every day and this can be time-consuming. It also means that if you slack off even for one day, you will end up with outdated data and this is bad for business. Also, spreadsheets offer no analysis to show your products are selling. They are not scalable and cannot communicate with your POS either. So all in all, spreadsheets are not an efficient inventory management solution.
- What if OrderCircle’s inventory management software does not meet my requirements?
At OrderCircle, we strive to serve our customers in the best way possible. If you’re looking for something customized to accommodate your business’s requirements, OrderCircle will gladly assist you. To find out more, request a live demo today by clicking here.
- Can I try out the service as a test run?
OrderCircle offers a free trial with a 30-day money-back guarantee for all its new customers so that they can test the service and be satisfied before they sign up for it. For more information about our free trial and other inventory management stuff, click here.