Inventory management is not the most exciting retail topic but it is crucial for all business. It can make or break your bottom line. By having too little inventory on hand, you risk losing customers as products quickly sell out. However, having too much inventory ties up valuable cashflow and costs more to store and track. Effective inventory management sits between these two extremes. While it takes more work and planning, your profits will reflect the effort you put in. Thankfully, there are proven best practices for effective inventory management.
1: Focus on Your Customers First
When looking at inventory management, it is important to focus on your best customers. They are key to your future success. “Best customers” are those who shop often, spent the most, and already love your products. By keeping them happy, they will keep coming back. It is part of the important 80:20 rule. This rule states that 20% of your customers are responsible for 80% of your profits.
Look at the products these customers are buying. Products that sell well with these dedicated customers are likely to attract new customers. Consider them a representation of market trends – by analysing what your best customers buy will keep you ahead of the pack.
Consistent quality and product categories also helps strengthen your band. The more you can deliver on high quality, recognisable and branded products that appeal to your “best customers”, the better these products will sell.
2: Audit and Categorise Your Inventory
It is important to categorise your inventory into priority groups so you know what you need to order more of and how frequently you order. Not all items in your inventory are equally important. ABC analysis is the best way to categorise your inventory. In fact, many industry leading inventory management programs utilise ABC analysis.
Items in your A group are the high ticket items that you generally need fewer on hand. Group C items are lower cost items with quick inventory turn over times. And Group B is everything else, the moderately priced items that sell slower than Group C but faster than Group A. This allows you to analyse and optimise the use of warehouse space.
It also allows you to ensure the most important items are always available. You should be using the most space for items that are in demand, and less space is dedicated to less important stock.
You should audit your inventory weekly or monthly, though some companies do a comprehensive review once a year. No matter how frequently you do it, you should make a point to count your inventory regularly to make sure it matches what you think you have.
3: Develop an Effective Inventory Management Plan
After studying, auditing and categorising your products, it is important to develop a proper inventory management plan. This may require the efforts of many departments in your business, including marketing, catalogue, merchandising, sales, and eCommerce. You need to work with these departments to move your Group C products, especially.
Having a management plan also allows you to control costs and preserve your profit. For example, customers don’t want to pay full price for end of season stock, and you don’t want to spend extra money managing and storing slow-selling stock. This is why you need residual inventory management. You can analyse what remains at the end of the season and is being carried into the next season. And you can then put those items on sale, as a result. For example, putting winter knitwear on sale in spring.
You can manage residual stock by creating season codes with style numbers as you add products to your inventory. This makes analysing stock vastly easier.
Establishing inventory KPIs can also help you measure your performance in particular categories over a specific amount of time. This helps eliminate guesswork by giving you clear milestones to hit weekly, quarterly and/or yearly. With the data you create from KPIs, you can make the best strategic decisions for your business.
4: Track Your Product Information
It is important to keep good records on your products including SKUs, barcode data, countries of origin, lot numbers, and suppliers. It is also a good idea to track the cost of each item over time so you know what factors may change – like cost, seasonality, and scarcity.
You could, for example, use batch tracking, also known as lot tracking. It is a process for efficiently tracing goods along the distribution chain by utilising batch numbers. Batch refers to a particular set of goods that are produced together and use the same materials. This is helpful to pinpoint any quality issues as they can be quickly isolated to particular batches, should you need to recall.
By having an effective inventory management plan also allows you to track moving inventory. This creates an easy, seamless experience for staff and customers. If one location has sold out of a product, staff can easily find a location with it in stock, request it, and have it sent to the store or customer. Tracking inventory also means you can track products in transfer so you don’t have issues with overselling and fulfillment.
5: Consistent Supplier and Restocking Systems
An unreliable supplier or restocking system can make inventory management extremely difficult. Unreliable suppliers cause headaches when it comes to inventory. If you have a particular supplier who is always late with deliveries, or frequently shorts you on stock, you need to take action. Discuss the issues with the supplier in question and find out what the problem is. You may have to choose to switch partners, or continue on with unreliable service.
Consistency in receiving stock and restocking is also important. You need a standard process that everyone on your team follows to avoid discrepancies. Even the smallest discrepancies can cause issues with restocking and fulfilling orders.
6: Inventory Management Technology
There is, of course, more than one way to manage your inventory. This includes vendor-managed inventory, inventory management technology, and cloud-based technology. By utilising these options, you can effectively automate your inventory management processes, making it easier to maintain accurate inventory counts. Automating your process means you can leave the paper process behind, and utilise a simple handheld device to manage stock. Leveraging software and inventory management software you can gather better data on product sales and popularity.
While many small businesses can easily manage their inventory manually, using notebooks and spreadsheets, as your business grows this is no longer viable. You end up spending more time on managing inventory than doing anything else with your business. Effective inventory management technology makes inventory management easier and taking the stress off your shoulders. It is important, though that you choose a software solution that works with what you need, is easy to use, and provides you with the right analytics.
You also need to ensure your chosen software integrates well with your business and processes. Your software should properly communicate with your POS systems, for example, so there are no discrepancies in inventory levels.
If you are wanting to discuss inventory management technology options for your business, click here
During these challenging times with COVID-19, running a multi-channel business is even more important as some of the traditional business channels may be impacted with shutdowns and changed trading conditions.
You are running a multi-channel business if you have multiple sales channels or ways that your customer can buy your product. For example, you may be a wholesaler who has a sales team which visits customers taking orders, but also operates an online store where customers can but direct from you. You may also have a bricks and mortar store and have a point of sale system recording sales.
One of the key challenges with a multi-channel business is being able to keep accurate records and track of your business across all the different channels in your business. This becomes increasing difficult in fast growing businesses when you are trying to maintain multiple disconnected systems.
Having an integrated solution will reduce the amount of data entry which is required to maintain multiple systems as well as giving you a clear idea of how your business is performing across all of the different sales channels.
Some possible solutions include integrating an inventory management solutuon like Unleashed or Vend with your ecommernce platform like Shopify or Magento. If you also operate a bricks and mortar store you can integrate a point of sale solution like Vend. If you sell business to business then adding a B2B portal to assist with your order management may also improve your efficiency. Of course this will also be integrated with your accounting solutiuon either Xero or Quickbooks Online. As you can see there are lots of options, but getting the right set of solutions will greatly assist you taking your business to the next level.
If you want to improve the business software solutions in your business, click here to arrange a FREE initial online consultation
DEAR Systems have had a busy July announcing a range of updates and improvements to their point of sale and inventory management solutions.
On the 1st of July, the following updates were implemented. A new document template was introduced which includes a product matrix table in your purchase order/sales quote/sales order/sales invoice. The integration with Amazon was enhanced to allow for the import of Amazon fees and charges. Also, the DEAR warehouse management system (WMS) now handles the stock transfer feature.
On the 29th of July, the following updates were implemented. DEAR inventory now has a sales order routing feature which will optimize the DEAR warehouse locations based on the sales order shipping address.
There has also been an enhancement to the integration with Shopify with a new special Tax-Free rule added to the tax mapping in Shopify. If a DEAR tax rule is mapped to this Shopify rule, it will override any other taxes in cases where tax amounts are zero on the line.
The integration with Quickbooks Online was also enhanced with the following updates. An optional auto-sync feature has been introduced for Quickbooks Online. You can also now choose to import purchase & sales invoices from Quickbooks Online.
There has been an update with the DEAR B2B portal which now allows customers who place orders through the B2B portal will now be able to see the estimated delivery date inside their order information. The required by date in DEAR will be used as the estimated delivery date on the portal.
DEAR also announced a range of updates to their point of sale (POS) solution. The first one is if Loyalty is disabled within DEAR POS setup page, no information regarding loyalty will be visible within DEAR POS application.
The second one is you can now issue Refunds for sales made outside of DEAR POS. The No Receipt Refund button has been introduced in the sales history screen for this purpose.
The third one is now when an Exchange is processed in DEAR POS a new fulfillment will be created in the Advanced Sales Module for the newly exchanged product. Pick/Pack/Ship for the new item will be completed automatically by DEAR.
The fourth one is that if a Deal created in DEAR is not applied to a specific item (e.g. a product or some other product attribute like tag/brand/category), this Deal will now apply to all products listed in POS.
The fifth one is optimization for customer lookup/selection has been introduced within DEAR POS which has improved the speed of the customer search function.
The final update has been the inventory list in DEAR POS will now show Available quantity instead of Stock on Hand quantity.
Looking to improve your inventory management and point of sale solutions, check out our DEAR Systems page for more information.
Whether you are just starting a business or have been in business for many years, having the right set of business tools is important to allow you to scale and grow your business.
Often the first business tool which you will look at is an accounting system which will allow you to issue invoices to your customers, record your supplier’s bills, pay your staff, reconcile your bank account and lodge your GST returns with the Tax Office.
Whilst your accounting system is a great start, what are some other business tools which will work in your business?
If you are a wholesaler, having a dedicated inventory management system is critical as it allows you accurately keep track of the amount of stock you have on hand as well as providing an accurate cost of the product which will allow for accurate sales reporting.
If you are a manufacturer, having a dedicated inventory management system is also critical as it allows you to accurately manage the component products which you use to produce your final product.
If you are in a professional services business which sells time, having a job management system is a critical tool for your business. You need to be able to accurately schedule in client work, allocating your staff to work on different jobs at the right time so that you deliver an exceptional customer experience. You also need to be able to accurately assess how profitable every job is so that your business is profitable.
If you are a retailer which has a “bricks and mortar” store, your cash register is your key tool for sales information. You will use it for adding up your total sales for each day as well as determining what products are popular and which ones are not. You also need to have a way of tracking your inventory levels so that you can also have sufficient inventory in the store for your customers to buy.
If you run a trade business like an electrician or plumber, having a job management system is a critical tool for your business. It allows you to accurately quote a job, schedule in the job with the customer, track the time and materials which you have used and review the job profitability.
All business owners need a tool for storing their customer information as your customers are one of the biggest assets to your business. Often this information is stored in multiple places across the various business tools which you have that makes it hard to use. Storing your customer information in a central database called a customer relationship management (CRM) system allows the business owner to get a complete picture of the interactions which a customer has with their business and to use this information to better market their products and services to each customer.
The true power of these business tools comes when they are integrated together allowing for automation which streamlines the operations of the business. Once the business systems are in place and the business processes are automated this allows for the business to scale and grow at a much faster rate.
Does your business have the right set of tools to scale and grow? If you are not sure, book an initial free consultation with us to discuss your current tools and what you would like to achieve.
Historically a business’ purchasing process is very manual and highly administrative. To place an order with a supplier, a purchase order would be prepared which meant a document was prepared either using Word or Google Docs or through your accounting system (Xero, Quickbooks Online or MYOB). The document was then sent to the supplier who would have to rekey the order into their inventory or accounting system. The supplier would then send a series of emails to their customer advising of the status of the order.
With the level of business transactions increasing and the expectation that information is exchanged in real time, the purchasing processes of businesses had to be streamlined.
One development has been the introduction of a business to business (B2B) portal. The portal is basically a website which is connected to your inventory management system which allows for a secure way for businesses to request quotes and place orders with their suppliers.
A B2B portal provides significant benefits to both customers and suppliers. For customers, the B2B portal provides an easy way for orders to be placed with suppliers or for quotes to be requested. No more preparing purchase orders in Word or using their accounting system to produce purchase orders which need to be emailed to your supplier. Another benefit is that the customer is able to view the status of their order through the portal so that they no longer have to rely on receiving phone calls or emails.
For suppliers, the B2B portal streamlines the order processing process. As the B2B portal is connected to their inventory management system once the customer places the order they are advised of an order which is sitting as an open sales order for them to action. No more rekeying of customer purchase orders into your inventory management system.
As the B2B portal is connected to the business’ inventory management system it will always reflect the current products and pricing of the business. This provides a huge benefit to businesses who are constantly adding and removing products or updating pricing as they can always provide accurate product and pricing information rather than trying to maintain a constantly changing product catalogue.
As the customer’s purchase order is instantly converted into an open sales order it allows the business to implement a paperless online ordering system quickly and easily. This will eliminate data entry which can lead to errors when a purchase order is rekeyed as well as reducing business administration costs which will lead to improved margins.
Is your business looking to streamline their purchasing processes?
Contact us now for a free initial consultation and see how a B2B portal with an inventory management solution can streamline your business operations.
Earlier this month, Unleashed announced some important enhancements to their Xero integration. We have included details of each enhancement and how it may affect you.
Batch your journals for quick reconciling in Xero
Unleashed will now batch all transactions made within the day and post one journal to your Xero account split by accounting code. The journal will be posted at 2.00 AM the following day and will be ready for you when you log on in the morning. This is a really useful enhancement as the journals use to be posted individually at the time the transaction was completed in Unleashed which meant ensuring all the individual journals were approved in Xero so that Unleashed and Xero would reconcile.
Link to a transaction in Xero from Unleashed
With this improvement, you can view a transaction in Unleashed and click through to view the same transaction in Xero. This quick and easy transition makes it a breeze to compare transactions between both platforms. This is another really useful improvement as it replaces having to manually search for a transaction in Xero which was both time consuming and inefficient. Below is a screenshot of how the Xero link will appear in Unleashed
Choose the product information you send to Xero
This improvement allows the user to choose what product information Unleashed sends through to Xero for all transactions. Users can choose between Product Code, Product Name or both. This flexibility allows users to decide what product information their customers and suppliers will see on their documentation. This is another significant improvement as the information sent was not able to be adjusted which led to a manual correction in Xero.
Auto approve specific Unleashed transactions exported to Xero
With the ability to auto approve exports to Xero, you can select the specific types of Unleashed transactions that can be automatically approved. With a quicker impact on your P&L, you’ll gain real-time insight into your bottom line. This has been the most asked query which I am asked by customers as to why I have to approve the transactions in Xero even though they have been completed in Unleashed.
Prominent alerts for journal errors
If there’s an error in exporting journals through to Xero, you’ll now receive a prominent alert so you can quickly take action to ensure your items are sent through to Xero in a timely manner. This is another great enhancement as we often receive support calls from clients well after the error has occurred and this timely and prominent alert will allow for errors to be rectified in a far more timely manner.
Allow Sales Order & Purchase Order comments to be transferred to Xero
Ensure that comments on your sales and purchase documentation are not lost in Xero as you transfer documentation from Unleashed. This allows your customers and suppliers to receive better and more detailed information from you! Once again we get asked by customers if the line comments and sales order comments can be transferred to Xero and now they can.
Overall there are some awesome enhancements to the integration between Unleashed and Xero. If you require any assistance setting up these enhancements in your Unleashed account please do not hesitate to contact us
If you are looking for an inventory management solution for your business, check out Unleashed.