The Small Business Administration cites poor inventory management as one of the top 10 reasons businesses fail. An out-of-stock item could mean an out-the-door customer, one who’s willing to pay a premium to get what they want today instead of next week.
Overstocking is also a danger, though less obvious. Product sitting on the shelf can lead to spoilage, disorganization and unneeded expense.
Small businesses often don’t have the flexibility to dedicate extra manpower to inventory review, and miscommunication in product flow can be catastrophic. That’s where a little technology and some innovation can come in handy.
Managing virtually, not clumsily
Depending on the volume of product, accurate inventory can be maintained with a system that uses a smartphone scanner, or a more robust system that integrates industrial-grade scanning devices. Both have their advantages, and the professional equipment is becoming increasingly affordable as it finds its way into more common use in small businesses.
Looking back to plan ahead
Dr. Arthur Hafner, who studies statistical trends at Ball State University, says that as a general rule, 80 percent of a business’ sales come from about 20 percent of its inventory. It’s important to understand how products flow in a small business. What is the flagship product and what only sells seasonally? The best way to understand these trends is by analyzing the last year or more of purchasing and sales data, but digging through spreadsheets to make sense of those numbers can be overwhelming, and crunching numbers manually could lead to inaccuracies.
Managing inventory in real time using scanning technology ensures more accurate information. Most software packages offer customizable reports and alerts that allow for proactive managing based on trends.
Integrating across departments
Knowing what’s on the shelves in the back room is important, but inventory isn’t stagnant. Multiple departments generally depend on knowing what’s on the shelves, so the inventory needs to be accurate. Smaller businesses can use barcoding software technology to keep everyone in the loop, from the moment new stock enters the back door to when the point-of-sale terminal or shipping manager sends a product out.
Dave Donovan, writing for the business-consulting firm Dun & Bradstreet Credibility Corporation, says the best way to avoid losing track of inventory is “to use electronic data interchange (EDI) barcode scanning. This will help track the inventory more accurately as it progresses through the chain of custody.” Manually entering new orders or updating a spreadsheet on an old desktop computer doesn’t cut it anymore. Everyone needs to be on the same page.
Periodically reviewing inventory
Even with the most cutting-edge software that communicates with all departments, creates invoices and even automates daily reports, there is a possibility of error. A monthly or quarterly manual review of the inventory is a good idea to catch any incongruities. It also offers management a chance to see any breakdowns in communication, which should make the entire inventory-management system more efficient.
Whether you own a women’s clothing boutique or a health clinic, every business owner should know what’s going on with its inventory at all times. That doesn’t mean it should be hard work. Utilizing software and scanning technology means working smarter, not harder, at inventory management.
Christopher Walljasper is a Chicago-based freelance writer. He has experience in the mobile technology world and enjoys exploring the ever-changing tech landscape. When he’s not writing, he enjoys spending time with his wife, Annie, daughter, Lucy, and basset hound, Ellie.