Everything SMBs Should Know About Inventory Management
Whether you’re running a large corporation or a small family business, one thing nearly every company has in common is tracking inventory. It’s a very important, very irritating part of the job if we’re all honest with ourselves. It’s time-consuming, it’s tedious and it’s potentially labor-intensive.
Worst of all, despite our best efforts, those inventory counts never seem to come out accurately. It’s hard to use or sell what you don’t actually have, which can create some serious problems with meeting customer demands. So we’re spending time and effort on a manual system that’s only partially reliable at best. It’s a little like owning a junker car that only starts some of the time. Not exactly something you want to depend on.
Business moves faster than it used to, and when you’re competing against things like Amazon Prime two-day shipping, you can’t afford for your inventory counts to be off. You can’t afford to let inventory go “missing” simply because you have no way to determine who had it last. You also can’t afford to wait two weeks for a reorder after you suddenly discover you ran out of something.
The drawbacks of manual inventory tracking
Fifty years ago, inventory management consisted of walking through the warehouse with a notepad and a pen. It meant counting everything by hand individually, and, depending on the size and fullness of your storage, that could mean tons of tedious tallying for days at a time. Quite trying, truly.
Of course, teams would try to keep accurate counts every time new shipments came in or inventory was used, but there was no guarantee that either of those counts would be accurate. That meant having to double-check the count by counting everything, again, with no guarantee of accuracy.
What’s more, without any unified system tracking who has what and where everything is, it was very easy for individual items to go “missing,” or even to actually go missing, with no one able (or willing) to account for it.
As a result, teams were sinking countless hours into getting accurate counts, only for those counts to be error-prone, faulty and unreliable. This resulted in several problems, including:
- Trouble keeping things in stock
- A sluggish reorder process
- Disruption of work processes
- Friction between operations teams and management
- And, ultimately, disgruntled customers
The worst part? Some companies still use this version of inventory management, despite the fact that there’s a measurably superior alternative.
What is an inventory management software?
Imagine for a moment that you own a smart fridge. Scratch that; imagine for a moment that you own the smartest fridge. When you bring home groceries, you scan the barcode on each item before placing them in the fridge. Then, a display on the front tells you what you have in the fridge, and how much of it there is.
Then imagine that this fridge also tracks who uses the food in the fridge, so that when you find the empty milk carton still inside, you know exactly who finished it and didn’t throw it away. You know who’s eating all the cheese that you keep having to rebuy, and you know that the Granny Smith apples keep going bad because no one but you can apparently tell how delicious they are.
This fridge alerts you when things are running low. Better still, you can set it to reorder food items for you, so that the next package of lunch meat arrives just about the time you’re finishing the previous one. Best of all, as you’re climbing into bed late at night and you wonder if there will be enough yogurt for your yogurt and granola breakfast the next day, you can check the levels, and then allocate the yogurt you need so no one else can use it before you.
We’re not sure if such a fridge exists (probably not; we’re still all waiting on the jetpacks and hoverboards the future promised us), but we do know a very similar system is available for your business. It’s called an inventory management system, and it’s a real life saver.
(Disclaimer: we cannot confirm that any inventory management software has actually saved lives yet, but really, it’s only a matter of time.)
Like so many other things, digital systems have made running operations and logistics much easier by offering an automated solution. Inventory management systems take the time, effort and human error out of the difficult task of inventory tracking. This is done by maintaining an electronic record via a single, user-friendly portal—one that automatically updates when inventory is added or used.
- Inventory systems track:
- Quantities of items you have in stock
- The location of each item
- Who is responsible for an item (i.e. if a technician takes an item out on a call)
- Which and how many items need to be allocated for sales/service/usage
- Customizable and automatic restock levels
- And more
That’s it. No strenuous record keeping. Just an inventory tracking system that very nearly manages itself.
Benefits of an inventory management system
With an inventory management system, you no longer have to keep track of products or supplies yourself. You can track fluctuations in usage and apply business intelligence and analytics. You can set automatic reorder points, allowing for better “just-in-time” implementation. You’ll have fewer “out of stock” moments, better insight and improved efficiency.
You’ll also have visibility into who’s responsible when items disappear from stock (and will, potentially, be able to differentiate intentional from accidental). You’ll be able to track inventory in multiple locations, so no matter how many trucks, warehouses or cramped storage closest you house your inventory in, you’ll be able to see it all and know where everything is.
It’s how you’ll keep your business running at peak productivity. It’s how you’ll prevent loss. It’s how you’ll stay organized without wasting countless man-hours. Perhaps most importantly, it’s how you’ll keep from disappointing customers because something you offered (or worse, something you promised) is currently unavailable. Pretty much the only thing it won’t do for you is brew the perfect cup of coffee.
How to implement an inventory automation platform
While implementation is something your inventory management software provider should have a proven process for, Here are some pointers for those curious about how to do it right:
- Top-level champions and every one’s buy-in
- Find the right solution
- Dedicate time for training to learn the new system
- Put in place processes for everyone to follow
- Maintain accuracy (GIGO)
- Collect data, analyze and make necessary adjustments at regular intervals
First and foremost, for a system like this, you have to have the inventory management software in place before you start collecting the data. It doesn’t really work the other way around. Get the system up and running, then start aggregating your data for it. It’ll be much easier that way.
In order to do that, you’re going to need to find a solution (we can help with that too; we know a guy). As you begin the process of getting the solution in place, you’ll want to get buy-in from every level, top to bottom. These kinds of things don’t work if whole groups are digging in their heels, after all.
Depending on how big your organization is, that might take five minutes (as in, talking to the only other guy that works there), or it may take much longer. Either way, get it done.
Next, put the system in place, and support it with company processes that encourage its correct and effective use. Just like all computer systems, you get out what you put in, so it’s either Garbage In, Garbage Out (“GIGO” is the technical term), or it’s good data in, good data out. The choice is up to you, really.
Once you have it purring like a kitten (software does that when it’s working right, in case you didn’t know), you’ll want to monitor and make adjustments to how you use it according to your needs. Do checkups at regular intervals regarding usage, accuracy and efficiency, then analyze that data and change or update policies when necessary.
From there, it’s just a matter of being consistent and sticking to proper usage. The system takes care of everything else..
Choosing an inventory management softwareNow, how do you find the right inventory management software? First of all, you should use the solution that best fits your use case, regardless of where you find it. (Unless you find it on the ground outside—you have no idea where that’s been.) Use case and individual needs will vary business to business, so it’s not one-size-fits-all, but there are at least four top features we can recommend as must-haves for any solution you choose:
Complete visibility from any locationInventory isn’t just something for your warehouse manager, service manager or techs to worry about. Your entire team needs access, and they need ways to access outside the office, such as a mobile app or online portal. This is especially important for field techs that leave the office to do their work. An inventory system that won’t let them update on the go will be prone to error, and at risk for loss.
Workflow automationYou want to keep your team “shoulder to the wheel, nose to the grindstone,” but you also want them to mind their surroundings, so to speak. It’s not very easy to be focused and split your focus at the same time, and a lot of things tend to fall through the cracks as a result. Without a way to organize and track everything that needs to be done, and remind team members that it needs doing, productivity can take a serious dive. Workflow automation helps solve this problem by allowing you to input tasks into a central system that tracks everything. It allows you to create unlimited automatic workflows that trigger alerts, such as when stock levels reach a set threshold or when the lifespan of a product reaches a certain age. And it even allows you to automate certain tasks, taking them off the plates of team members. It’s like the world’s most helpful (and proactive) to-do list, and your team will thank you.
Easy quoting and invoicingYour sales and accounting teams both benefit from effective inventory management. Sales will be able to build quicker, more accurate quotes and include discounts that still leave them with a commission and you with a profit. And once a sale is made and/or installation is completed, automatic invoices are sent with detailed, accurate information. Should a customer have a question about a charge, accounting can easily pull the information and address the problem. That is, as long as the solution you choose has the proper functionalities in place.
Profitability reportingInventory can be a huge financial boom or a bust depending on how effectively it’s managed. Accounting and leadership need accurate, real-time data to calculate inventory value, profit margins and more so they can make informed decisions and, in turn, ensure and increase profitability. Without timely profitability reports, they don’t have any of that.
Effective and efficient inventory management
Listen—we both know you’re tired of your metaphorical junker car. It’s gotten you as far as it can, but it’s time to stop wasting your time with an inventory management vehicle that you can’t always trust to get you where you’re going.
So ditch the junker. Kick it to the curb, and say “good riddance.” Then go get yourself a sleek convertible that goes from zero to 60 in 1.8 clicks of the mouse.
Just be sure you get the one you can fit the whole family in. In other words, find a complete business automation solution, one that covers all your needs and not just inventory management. Your business faces a lot of challenges, and business automation software can help solve nearly all of them.
If you want to know more about finding the right solution for you, here’s a checklist for finding one with all the bells and whistles you need. And, if you’d like to learn more about what inventory management is, how it works and what it can do for your business, contact Tigerpaw today to schedule a demo.