Large companies often have entire teams focused on inventory management, but small business owners aren’t that lucky. They have to keep inventory balanced with a small team, or sometimes, personally. Successfully inventory management is vital for keeping business operations going. This guide shares tips to make the process easier for reduced teams.
Small business owners need to reach two objectives related to their inventory: creating product groups and setting aside space for each group. Trying to store inventory items haphazardly, mixing different groups depending on where they fit on shelves, is just asking for problems and headaches down the road.
How should inventory groups be organized? It depends on the store’s needs and the type of inventory. Some owners use the following groups:
- Fast-turnover: These are in-demand items that tend to sell quickly. They practically fly off shelves.
- Big-ticket items: These items produce significant revenue but also cost more. Owners don’t have to carry as many in stock, but big-ticket items should grab the most attention.
- Lowest-cost items: This inventory is made up of products that have tight profit margins but exceptionally low costs. The trick is to avoid using too much storage space for these items.
- Moderate movers: The final group falls in between the rest. It includes moderately priced items with comfortable profit margins but a slower turnover.
The better organized inventory is, the easier it is to manage. Parents can understand this principle. When a child’s toys have a designated bin for storage, the amount of time needed for cleaning up the bedroom is lower. Parents can quickly identify where each item belongs and find it later easily.
Choose a Point-of-Sale System With Inventory Tools
Trying to track inventory by hand is a pain for any business, but even more when companies have few employees and a high volume of products. Many small business retail stores fit this description.
Thrift store inventory management is even more demanding. Whether inventory comes from donations, agreements with other stores, estate sales or other sources, thrift shops have to manage countless pieces. Products need specialized categories as well, because inventory must be grouped by condition as well as appearance. A good POS system for thrift stores can take care of many organizational tasks automatically, saving employees significant time.
Other small businesses can benefit from comprehensive POS systems, too. For example, a retail store that sells home decor can keep tabs on its goods more efficiently with the power of modern technology. Today’s software can show customer trends, providing insight into the best times to order new inventory, offer sales and reach other objectives.
Analyze Inventory Reports Periodically
Knowledge is power in the world of business, and inventory management is no exception. The more data a small business has regarding sales, purchasing and inventory, the better it can balance all three departments. At the very least, owners should review inventory details several times a year. Many choose to check reports each month.
The data can reveal key habits that make ordering more effective. After all, business owners don’t dictate what their store sells: customers do. If the demand for certain types of items keeps increasing while others are consistently having trouble selling, the local market may be sending a message.
For thrift stores, it’s also important to look at trends regarding inventory sources. When donations are down, store owners need to figure out why. Are donation points inconvenient for residents? Is the local economy going through a harder time than normal? Depending on the answers, there are many solutions that can work, such as partnering with other businesses for a charity drive or shifting the focus of marketing online.
Make the Final Decisions From the Top
It can be tempting to have employees handle ordering. Some businesses set up automated orders or have suppliers take over orders. All of these options, while convenient, don’t provide great results for profitability.
Never allow vendors to decide on orders. They have their own motives, which mainly involve doing what’s best for their business, not for small business clients.
While employees and automated solutions can help out with overall inventory management and recommendations, owners or managers should have the final say every time. Maximizing profits requires a lighter touch, an experienced hand that knows which items to prioritize at different times of the year.