Inventory problems can be costly for small businesses. Whether it’s slow fulfillment times due to a disorganized warehouse or overstocked and out-of-stock items, each inventory error comes with a price tag for small businesses. Over time, they can cost a business both its cash flow and its customer base.
Business owners can drastically reduce inventory problems by implementing systems that take human error out of the equation. By creating a system that relies on automation rather than manual processes, it’s possible to reduce errors and maximize efficiency in inventory control.
Where do businesses start? These are the six steps to take for any small business that wants to solve its inventory problems once and for all.
1. Organize your warehouse
Disorganized warehouses are a common source of inventory problems. While the space and infrastructure required to maintain an organized warehouse can be costly, it’s a worthy investment. Messy warehouses are prone to lost items, breakage, expiration, and other problems that cost a business money and slow its operations. By creating a space employees can easily navigate to find what they need, businesses set the stage for better inventory practices.
2. Label everything
Barcodes, GPS, RFID — businesses have options when it comes to tagging their stock, but not tagging is a mistake. Without a reliable way of identifying stock, warehouses are prone to lost items, mispicked orders, and slowdowns throughout. Tagging is also essential in order for a business to automate its inventory management practices. Businesses should choose a label that fits their scale and system and attach each tag to an entry in their inventory database.
3. Implement inventory management software
Speaking of inventory databases: Inventory management software is a must for any small business processing more than a handful of orders per day. By linking inventory tags directly to management software, businesses can automatically update stock numbers throughout their business. That allows warehouses, storefronts, and online stores to all operate using real-time information rather than relying on outdated and out-of-date spreadsheets.
4. Adopt a warehouse management system
Inventory management software tells you what you have in stock, but it doesn’t tell you where it’s located or the most efficient way to pick an order. For that, turn to warehouse management software. Warehouse management software provides detailed information regarding stock location, fulfillment times, and shipping procedures to improve both warehouse operations and customer service.
5. Choose an inventory valuation method
To truly understand your inventory problems, you need to see more than stock numbers — you need to see the financials. That’s where inventory valuation methods come in. Inventory valuation lets businesses assess their profitability and identify inventory shortages and excesses. First-in, first-out is the most well-known inventory valuation method, but different industries may utilize different methods.
6. Train employees on inventory best practices
The final step in any business system is implementation. While automated inventory processes largely eliminate problems caused by human error, they still rely on a company’s employees to operate. It’s imperative that businesses train and enforce inventory management best practices to ensure stock is accurately recorded at every critical point in a warehouse’s operations.
Overhauling a small business’s inventory management system is no small undertaking, but it is a worthy one. By eliminating warehouse and inventory issues, small businesses can maximize their ability to fulfill orders and satisfy their customers. That leads to lower labor costs, higher profits, and greater growth potential. For any small business that intends to scale, getting its inventory in order is a necessary first step.