If you’re running a small business that sells physical products, you’ll need some kind of inventory management system in place. But if you’re new to the world of entrepreneurship, or if you’re working with a team that has limited experience, you might not know where to start. While it takes experience and knowledge to perfect the art of inventory management, you can feasibly get started with a basic understanding and an introductory system.
The Basics of Inventory Management
Let’s start by reviewing the basic requirements and goals of inventory management. Inventory management is all about keeping track of your inventory (i.e., your products) along each step of your supply chain, from the time it’s shipped to you (or the time it’s produced) to the time it’s sold to a customer. Properly organizing and analyzing your inventory will help you make smarter business decisions, including which products to keep on hand, which vendor relationships to prioritize, and which security upgrades to make.
You’ll assign unique item numbers to each product and keep tabs on how those products flow over time. Inventory losses can be accounted for, sales can be tracked, and products can be easily found in your location once you know where they are.
Choosing the Right Software
It’s foolish to attempt inventory management with a pen and paper; instead, you’ll want to invest in good inventory management software—or better yet, rely on free inventory management software. A robust product will allow you to centralize your inventory management system so all your employees can share information in one location, while also making it easier to keep track of your products. Most modern software will offer a UI that guides you through standard inventory management procedures, or offer features that are intuitive enough for even a novice to understand.
Important Elements to Consider
As you navigate your inventory management software, you’ll want to consider the following elements to your inventory management strategy:
- Location names. Your storefront or warehouse will likely serve as the main “hub” for your inventory management, so it’s a good idea to get it organized from the beginning. Segment your space into various departments, sections, and subsections, and name those areas as specifically and intuitively as possible; your end goal should be for any employee to be able to instantly recognize which category, department, and store location an item would belong to. This will minimize mistakes in the future, and make it easier to find items on demand.
- Labels and item numbers. You’ll also need to come up with a unique labeling and numbering system for your products. If you’re using a scan-based system, these will make it easier for your employees to keep track of inventory levels consistently. Even if you’re counting manually, you’ll be able to use these unique numbers to look up products quickly and automate certain elements of the inventory management process. Aim to make your numbers both unique and recognizable, incorporating letters and numbers as part of a consistent format.
- Units of measure. You’ll also need to clearly define your units of measure for each individual product or category of products. For example, you might count some items individually, while counting others by the package or by the pallet. This is important not just for accuracy, but for saving time while counting as well.
- Accountability. Who’s going to be responsible for ensuring that your inventory counts are accurate? Depending on your goals and the nature of your organization, you might make each of your employees responsible for a different department’s inventory management, or you might have a single point person responsible for supervising all forms of inventory management.
- Policies and procedures. How are you going to count the products on your shelves? Will you be using an automated scanning system, or counting items manually? How often will you be making counts? Your exact policies and procedures aren’t vital to your long-term success; what’s important is that you have these policies documented and that all your employees are consistently following them.
- Checks and balances. No matter how well-defined your processes are or how much you trust your employees, it’s important to have checks and balances built into your system. For example, you might have different employees double-checking each other’s work, or you might appoint a supervisor responsible for overseeing everyone else’s numbers.
If this is your first time creating an inventory management system, or if you’re new to entrepreneurship in general, expect some hiccups in the first few weeks following your initial rollout. Pay attention to discrepancies in your counts, inefficiencies in your numbering system, and other flaws that could compromise the integrity of your data. As long as you keep tweaking and updating your system, you’ll eventually polish it to perfection.