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Thursday, January 6, 2011

Inventory Management Tips For Small Business

First off .... keep in mind that there is no one single technique which is 'best' for managing inventory. It depends on the operational environment.

Here are some Best Principles regarding managing inventory which apply across all operational and financial environments:

1. Have only what you need.

2. Ensure that it is in Fit-For-Use condition at all times.

3. Know where it it at all times.

4. Maintain Critical Characteristics within accepted tolerance.

5. Be able to access it when needed.

Not to scare you but Inventory Managementthis question encompasses an entire field of study. It all depends on your business. Large product requires different techniques than small product. Cheap products require different techniques than expensive products. Heavy produc t...... and so on.

The size of your operation is also a factor. Managing inventory is a 1,000 square foot retail back room can use a very light weight technique while a 100,000 sf or more operation usually requires a warehouse management system and some sort of automated pick controls.

I would start with ensuring that your inventory accuracy is at least 95% and preferably above 99% - in fact, the higher the better. You should have a process that keeps it there - it's no good starting the year with a 100% accurate picture of your stock and then allowing it to fall into chaos.

If you don't have accuracy, then pretty much anything else you try to do will falter.

I recommend the following book on the subject:

"Inventory Record Accuracy" by Roger B. Brooks and Larry W. Wilson.

Publisher: John Wiley & Sons, Inc, 605 Third Avenue, New York

ISBN: 0-471-13224-1

Although accuracy is the primary driver, depending on what you have and how you choose to measure accuracy, it's not necessary to strive for perfect inventory if you have extremely low cost product and high pick costs. Focus on the business first and put in place a system that balances inventory costs, labor, and capital costs.

For more ides I suggest reading the article Top 10 Ways To Make Managing Inventory Easier

5 comments:

Robert Lockard said...

Thank you very much for linking to my blog post "Top 10 Ways to Make Managing Inventory Easier." You made my day. I enjoyed reading your list, as well. Good job!

Inflow said...

I would also add to the list having some kind of indicator that tells you which products are bringing in the most revenue, profits, and losses.
-Jack

Tianna Flemings said...

Inventory management is one of the most difficult jobs in a company. Those who are in this kind job are those who are very knowledgeable about the equipment that they monitor. One simple mistake can cause another employee his work for the day, or even longer. That is why I give high regards to the quality of work of my employees.

Axel Petrelli said...

Great job! Warehouse management systems for success can help us in organizing the inventory. With it we can eliminate the inaccuracy and excessive cost that that we experience in our old management system.

Darcy Grubaugh said...

It's for this reason I depend on an accounting system software. Managing inventory can indeed be a frustrating task especially for businesses that started out small but suddenly find themselves with more units to oversee. When not properly managed or not accurately tracked, it can risk the operations of a business.

Darcy Grubaugh @ QuantumBuyers.com