What is inventory management?
Inventory management is the process of tracking and managing the number of goods a company has in store, warehouse, or with other retailers and distributors.
The importance of inventory management
In a Wasp Barcode Technologies study, 43% of small businesses do not track their inventory or do so using manual processes. The lack of an inventory management system can have a significant impact on business operations. Whether it’s retail, manufacturing, food service, or other industries, a company’s products are the core of the business. Inventory access can directly impact a business’ success, and inventory management is vital to its longevity.
Effective inventory management offers several benefits, including:
- Improved customer experience: With proper inventory management, companies can shorten delivery times and prevent the need for refunds.
- Optimized fulfillment: It’s easier to pick, pack, and ship orders to customers when items are correctly accounted for and stored.
- Improved cash flow: Having too much stock at once means the company has cash that they can’t move for other things such as payroll or marketing.
Fast Fashion brand Zara is a good example of a business that effectively manages inventory. Zara keeps a significant amount of its production in-house and sources raw materials near its headquarters. The brand uses optimization models to determine delivery quantities, which gives it higher profitability, lower markdowns, and greater value for customers and shareholders.
Inventory management techniques and best practices
Some industries can store large amounts of inventory for extended periods because there is no risk of the product spoiling or going out of style. However, businesses with perishable goods or demand-sensitive products such as yearly calendars or fast fashion don’t have the option of stocking long.
Here are some techniques and best practices to consider:
- Improve forecasting: Businesses should calculate projected sales based on previous transactions, market trends, and consumer demands.
- Use first in, first out approach: Sell goods in the same chronological order as purchased or created. This technique is crucial for perishable products.
- Categorize stock: Companies find it helpful to have stock categories by grouping items depending on their value.
- Identify low-turn items: Look for stock that hasn’t sold in the last 6 to 12 months and think of creative strategies like promotions to move them along. An excess of stock negatively impacts space and capital.
- Use inventory management software: While some businesses do well enough using manual processes, other companies use customized software as a service (SaaS) applications. These systems can provide real-time sales analytics and automate some processes, including tracking stock levels.
- Perform audits and quality control: It’s a good idea to periodically audit inventory to identify fast-moving products or items with stock issues. Businesses can also check the stock’s quality to ensure they don’t have any damage.
Cafe24’s inventory management system
The shift to e-commerce is accelerating. Small businesses and large enterprises need to establish online stores and sell over various channels to improve their reach and increase their customer base. However, selling across multiple channels presents several logistics challenges, including human resources and various needs.
Cafe24 helps address these challenges with services like the EZ-Admin system, which integrates online stores with their vendors and distributors. With this system, companies can access and communicate inventory information within its operations network. By providing efficient solutions for merchants to operate more efficiently, Cafe24 empowers merchants to reach new levels in business operations.