By Samantha Wallace
Small businesses need every edge they can get. Profit margins are usually razor thin, meaning any advantage can spell the difference between making money or sinking into the red. That’s why things like inventory management make such a big difference.
You’ve heard the mantras. Small businesses have to stay lean. They have to leverage their flexibility to outmaneuver the big guys. However, big-think statements like that don’t tell you how to reach your goals.
For that, you have to get into the nitty-gritty. That brings you into the world of tracking inventory – one of the nittiest and grittiest of small business processes.
Here are eight ways you can boost your profits by keeping a close eye on inventory.
Have a System
A statement like “you need to have a system” may seem obvious, but it’s one of those business axioms that tend to get ignored in the hustle and bustle of daily life.
When you are building a small business, you have to move quickly. However, you are often overworked and rushing against the clock. These conditions often lead to an improvisational approach, a process that tends to work against the implementation of a well-run system.
However, you shouldn’t leave inventory, either of final products or of raw materials, to a haphazard process. Systemize your approach. Familiarize yourself with the current standards, and get into the weeds with wonky concepts like NIGP codes, UNSPSC codes and eProcurement platforms. Becoming familiar with the details will create an early learning curve for you, but you’ll be better off in the long run.
Your inventory levels will change moment to moment. Create a system that can keep up. This will give you the in-the-moment information you need to maximize your resources.
Don’t rely on occasional counts to keep your inventory figures current. In order to beat the competition, especially as a resource-starved small business, you need to be as nimble as possible.
Invest in inventory management software. These programs make this constant tracking relatively easy and inexpensive.
Even as you install technology to track your inventory on a real-time basis, don’t avoid occasional hand audits altogether. They may seem slightly redundant after you’ve spent money to install tracking software. But, of course, that’s the point.
Regular audits act as a doublecheck for your software. They also give you the opportunity to reconsider aspects of your approach to inventory. Nothing brings issues into the foreground better than seeing them with your own eyes.
Analyze Sales Data
Keeping the right amount of inventory is a delicate balance. You want to have enough in stock to cover any sudden orders that come in. After all, telling customers they have to wait is good way to lose future sales. However, keeping a large inventory in stock is wasteful and potentially expensive.
Luckily, you don’t have to stumble in the dark when making his decisions. You have deep data bases to drive your inventory strategy.
Use your sales figures to help you make smart choices regarding your inventory. Moreover, don’t just rely on the raw numbers. Crunch the numbers to delve into deeper analysis in order to make the best decisions.
Trust the Market
It is easy to get married to an idea. You launch a new product that you think will take the market by storm. It doesn’t. Now you’re having trouble selling out of your initial inventory. Yet you still have plans to produce more.
This is a mistake. The market is trying to tell you something. Before investing in more inventory, rethink your strategy. The new product might still be a good idea. However, you might need to tweak your sales approach.
In other words, don’t override the judgment of the market based on your personal gut feeling. And this advice doesn’t just apply to new products.
Keep an eye open for stock with low turnover, inventory that doesn’t move quickly. As such, it has a tendency to build up over time, if you aren’t careful.
As a small business, you have to conserve every resource possible. At the same time, you have to be ready to jump at any market inefficiency.
Tight inventory management can help you maintain this balance. Consider a just-in-time approach. It might not work for every product or for every industry. But maintaining an ability to move your production capacity around helps you take advantage of those momentary opportunities that can make or break a fledgling operation.
Hire an Expert
As a small business owner, you have to juggle a lot of responsibilities. It’s hard to keep an eye on inventory when you oversee so many other aspects of the company.
As such, there is significant value in hiring someone specifically to run your inventory management operations. Not only will this person be able to devote their entire work day to the goal of keeping you as lean as possible, they will also bring a level of expertise you couldn’t leverage on your own.
Utilize Employee Feedback
Of course, hiring someone to run your inventory management on a full-time basis might exist outside your budgetary constraints. However, that doesn’t mean you have to do it alone.
Empower your employees to help you keep track of inventory. They are interacting with the products and with your customers on a day-to-day basis. They have the real-time information you need to operate efficiently. Set up a structure where they can provide you with feedback and intelligence.