4 Inventory Management Tips to Avoid Dead Stock and Improve Cash Flow
One of the most time-consuming and dreadful tasks for any business owner is inventory management. To put it simply, inventory management means keeping track of all your stocked goods, to ensure you have enough products or materials to fulfill demands, as well as minimize costs.
If you want to ensure you are never caught off guard, not being able to fulfill your orders, you need to learn how to properly manage your inventory. But worry not, because the following tips will help you get started.
Set par levels
Par levels represent the minimum amount of products that you must have in your inventory at any time. Think of it as a cushion, so you don’t get your stocks too low. Par levels must be set in concordance with how fast you sell certain items and how much it takes for the items to get back in stock.
Do keep in mind that setting par levels does require some research, so if you are not comfortable with doing that yourself, you can contact a company that provides forretningsløsninger, to help you out.
Also, remember that par level conditions may change over time, depending on your sales, so ensure that you check on them a few times a year, to ensure the set par levels are still making sense.
Use the FIFO rule
FIFO means first in, first out, which is an important principle in inventory management. This means that the products that enter your warehouse first have to be the ones that also get out first. This will ensure that, in case you sell products that have an expiration date, you won’t get stuck with them on your head.
This is the same principle that grocery stores use when they place their merchandise on the counters. You will always see that the products at the front of the row are the ones that will expire first.
In order to use the FIFO rule, you need to ensure that you have a good lagerstyring program that displays all the necessary information. Otherwise, your work will be 10 times harder.
Prepare a contingency plan
A contingency plan is something that will minimize risks in case of an unforeseen situation. You may encounter an unexpected sales increase, that can leave you without enough products, or a miscalculation in your inventory, or even a manufacturer discontinuing a product without a warning, so you need to be prepared.
Try to figure out as many situations as possible and find a solution for each and every one of them. You can also use a program such as Microsoft dynamics nav to keep track of your inventory and ensure you are all covered.
Even though you will mostly relate on software reports to see what gets in and out of your warehouse, you also need to ensure that the facts match up. This means doing a periodical physical inventory, where you count the products you have in storage and see if the numbers match. Additionally, you can also do a spot-checking, meaning each month you pick a product, count it, and see if the reports are correct.