“Can you check in the back?”

If you’ve ever heard those words, or used those words, you know that your business is dealing with some sort of stock.  Every business, whether small or large, has to be knowledgeable about the products they have.  Not necessarily talking about the product itself, that’s another topic of interest.  No. What we’re talking about is the number. The quantity. Your business involves products.  Lots and lots of products. And that is your lifeline, your life blood. Your stock. This is what makes your company the money, the profits it sees.  And to keep your shelves, tables and stores fully stocked, you’re not relying on magic, but management.  

Here are some points of emphasis in dealing with the inventory of your ever growing business:

Projections

Going into your new fiscal year, or if you’re starting out and going into your first year of operation, you’ll want to have a clear map of your company’s projections.  You’ll want to know the estimated sales targets and numbers, as this will be a determining factor in the amount of inventory you’ll be needing. Projections too low and your business may not have enough product to sell off and cover costs.  Projections too high and you’re now in the red because you’re sitting on a product that isn’t moving and you’re in loads of debt for your startup or production costs.

80/20

When you have your projections, keep in mind the 80/20 rule.  This suggests that 80 percent of your revenue is coming from 20 percent of your products.  Working with your projections, you need to work out what products are most popular and will sell, becoming the staple of your company.  Order the most of those and limit the rest so you don’t end up with more of what you can’t sell or too little of what’s flying off your shelves.

Low Turn Stock

As your year passes, you’ll need to look at your numbers and identify stock items that are not selling particularly well.  Items that are not producing a high turnover and are not moving can be a problem. Not only are you not selling these items, but you are taking up important space in your business for other items that could be sold.  These items will be things you’ll have to reconsider restocking, and any unmoved product may have to be sold off at a discount or even loss.

Inventory Management

As your business grows, so should you. You will inevitably be expanding your business model and looking to take on more products. Once you reach a point where you can’t manually keep track of your inventory, an inventory management system comes into play. You’ll also want to learn and incorporate practices of optimal reordering times, where you overlap stock deliveries and keeping an ample amount of safety stock, for unanticipated high peak sales, is key to ensuring you have products on your shelf so you’re never empty.  Click here to learn more about these important inventory management concepts.  Ensure you have the right tools and enough knowledge of how to keep your inventory moving.

FIFO

FIFO stands for First-In-First-Out.  You’ll want to keep this in mind when thinking about inventory management.  This is an especially important rule when it comes to perishable food items as expired or bad products, will immediately be unsalable and will be counted out of your inventory as a loss.

Audit Stock

As much as an automated system will benefit you and your company, from time to time, you’ll have to manually count the stock you have on hand.  This will ensure the accuracy of your product numbers as you’ll have to account for shrink. Shrink is the change in your inventory numbers, usually referring to a loss due to theft or lost product.  But you can also have a positive shrink due to things like mistakes made at the point of sale where a customer who has made a large purchase, forgets an item. Either way, your stock numbers will be incorrect and should be adjusted.

Stock Managers

If your business continues to grow, and you’ve considered automating your system to be more efficient, you might also consider a stock manager.  This will give you someone dedicated to making purchases and monitoring inventory. Having someone in this dedicated role will help keep your numbers accurately and ensure you have plenty of the product you need to keep your company operating at peak performance.

There are plenty of things involved in managing your company’s inventory, as you’ve only touched upon a few key important factors to keep note of.  As you continue to grow and expand your business, so should your product line, and so should you. Many factors will lead to a bigger operations team and better infrastructure to manage different departments will be key in keeping your shelves stocked for the long haul.