For start-ups that have inventory, managing that inventory becomes the most important part of your new business. It’s far from exciting, but it’s how you make a profit. It’s also more complicated than it looks.
Missing or poorly reported inventory can easily skew your numbers, which can result in misinformed decision making, which can lead to failure.
In addition, your sales numbers aren’t the only defining factor when it comes to your profits. Proper inventory management and cost reduction can help reduce overhead, which impacts your bottom line.
Here are four inventory management mistakes you should avoid.
1. No One Really Counts Inventory
The most fundamental part of inventory management as a new business is counting the number of products you have and keeping that number updated. The larger your business, the more time-consuming it can be. If you don’t keep your counting systems up to date, you’ll eventually grow to a point where counting inventory becomes prohibitively expensive.
Stopping warehouse operations to count inventory simply won’t do, and it’s unnecessary. Don’t aim to count everything in one day. Divide your inventory into sections and rotate your count accordingly. Use a barcode management system to expedite the process.
2. You Lack Performance Measurements
Just like any other part of your company, you want your inventory management to be as efficient as possible. That means using performance metrics to develop standards and measure performance. Inventory management is about more than just counting your products; it involves customer service and warehouse efficiency as well.
You can start by having your managers track fill rate as well as inventory turns for all products. This is something that should never be out of date. Every day, your managers must have a clear idea how your products are doing. Keep in mind that your inventory turn will vary depending on your start-up’s production cycles and sales.
It won’t matter how much money you’re making if you can’t get a handle on your inventory. If you can’t track whether you’re producing the right amount of products, or if you don’t know when customer orders are being filled, you’ll have to fill in your decision-making process with guesswork. That is unacceptable, as you’ll be unable to promise customers efficient performance, which can have a direct effect on your company’s sales numbers.
3. You’re Doing Things Manually
There’s a place in the office for paperwork, but that place isn’t inventory management. Proper use of software, or even spreadsheets, can save you a lot of time and eyestrain. Thinking that computer usage can result in mistakes is wrong; mistakes will happen no matter what. Even the most proficient data entry operators will eventually make a mistake, which can result in a headache. What computers can do is make it easier to resolve the mistake. Instead of sifting through papers looking for the relevant documents, you can use a find function.
This is also where you can make good use of the cloud. Many cloud services allow multiple users to edit or view the most recent save of a file simultaneously. This allows for up-to-date inventory management from your computer screen.
4. Employees Can’t Manage Inventory
Inventory management is not a job that can be done by just anyone off the street. Training may take time to complete, but it’s time well spent. It’s important to make sure everyone in the company can do their jobs well. If you don’t train them, you might as well be pulling people into your office, paying them to handle the most important part of your start-up and letting them do whatever they want.
This goes into human resources territory. Hire only the right people and vet them thoroughly. They’re going to handle the most important part of the company and letting just anybody handle it will only result in heartache. Hold all inventory managers accountable for their actions and their warehouses. Make sure they understand the value of training and how it’ll help them do – and keep – their jobs.
Making sure your inventory is in order isn’t the most exciting task for many new businesses, but if you can’t or won’t do it, you may as well throw your inventory out on the street. Make sure everyone is properly trained and your inventory management systems are in order and are as efficient as possible. Your products are how you make money. Treat them with respect if you want to succeed.