Companies that have effective inventory management systems in place are setting themselves up to increase their working capital, decrease costs, analyze sales patterns more comprehensively, achieve economies of scale and ultimately convert their inventories into cash.Five best practices of inventory management
Observing the best practices for inventory management, as laid out by the Canada Business Network, can help businesses maintain compliance with inventory legislation
, not to mention streamline their operations. The five-pronged approach recommended by the organization involves the close monitoring of consumer and industry trends to predict future demand and ensure supply is sufficient to meet this, discounting less-popular items or donating them to charity (a practice that may be tax-deductible, provided certain criteria are met), engaging in "just-in-time" management by finding suppliers that meet needs as orders are filled to help eliminate lag time, assembling a safety net of backup suppliers in case the primary ones cannot deliver and, of course, keeping comprehensive, up-to-date inventory records.Inventory software
can help facilitate the process of recording, tracking and analyzing sales and inventory levels, while simultaneously helping companies ensure they are meeting inventory compliance
standards and operating within the restrictions that are currently in place.Metrics are key
Another key management tactic involves setting service level targets in order to find a balance between the amount of inventory that is made available to customers and the demand for the products in question. These benchmarks can take myriad forms, including percentages (for instance, how many orders are filled), raw numbers (how many potential sales are lost as a result of items being out of stock, for example) and inadequate lengths of time (such as how long a customer waits after he or she places an order).
Regular, in-depth performance measurement is necessary in order to keep these targets tightly aligned with company goals and customer demand. Communication is a key component of this process—frequently checking in with customers is crucial in terms of ensuring goals stay realistic.When planning for the future, look back to the past
By integrating sales figures from past months, quarters and years, businesses can develop annual sales forecasts to further hone their inventory management systems. In order to come up with the most accurate and complete forecasts possible, companies should not only draw from their own past performance, but also incorporate economic trends and industry developments, as well as factors such as how direct competitors are managing their operations.
for more tips and information from the Canada Business Network.