Today we’re taking a look at three tools you can use to improve your inventory-management functions. Retailers and consumers have more choices than ever. In order to stay competitive, top wholesale distributors have lowered their profit margins and constantly seek ways to innovate.
We’ve infused technology into every aspect of our lives. In today’s ultra-connected world, you don’t have room to cling to outdated tools and procedures. The internet brought the world together and technology sped it up. You need to update your wholesale distribution company’s techniques and procedures or be left behind.
Cloud-Based Inventory-Management Platform
It seems like everything resides in the cloud these days. How can you bring your inventory management into the cloud? By using cloud-based software that makes your processes faster and more efficient.
A cloud-based system pulls everything about your inventory management into an off-site server, making it available online. Why does this matter to you? Because your inventory management can be viewed and used from anywhere your employees and partners can connect to the internet.
Research shows that wholesale distributors have improved a variety of key performance indicators by using cloud-based enterprise resource planning platforms that integrate customer relations management. On average, wholesale distributors lowered their inventory costs by 20-30%.
Cloud-based inventory-management software allows you to keep track of your inventory in real-time. Mobile devices, barcode scanning, and inventory records allow your inventory-management staff to see the digital paper trail for each product you sell.
Benefits of a Cloud-Based Inventory-Management System
Easy to Upgrade and Scale
When you pay for cloud-based inventory-management software, you pay for the features you need. Necessary tasks like upgrading are pushed out from the software developer online. Once your team begins to grow, you can upgrade as easily as you upgrade your cell phone’s software, with just a few clicks.
Instant Inventory Control
Amazing inventory control is likely the benefit your entire staff will notice quickly. Bad inventory control is cited as a top inventory-management pain point, and we cause most of that pain with our own errors. With cloud software, you can view your inventory as it flows through your processes and decrease chances for human error.
The beauty of the cloud is that you can manage multiple warehouses and sites and see your company’s complete inventory in real time.
Through the power of the cloud, you can conduct your business anywhere you can find an internet connection. It's becoming harder and harder to find a place that doesn’t have an internet connection. Cross-site management is particularly important for small companies and startups that may conduct a lot of business remotely. In these situations, you usually resort to hacked-together processes that MOSTLY work, like managing your inventory numbers in Excel spreadsheets.
Down-to-the-Minute Inventory Reports
You can use the hyper-accurate inventory reports generated by your cloud software to improve your forecast accuracy. Another serious inventory-management pain point, improving your forecast accuracy lowers your overstock and out-of-stock situations .
Inventory Auditing with Cycle Counting
The traditional method of inventory auditing (annual counting) is mentally exhausting, disrupts business operations, and encourages human mistakes.
What Is Cycle Counting?
Who looks forward to counting all of your inventory once per year? Cycle counting requires that you count portions of your inventory at a time. Meaning in the course of the year, you’ll still count all of your inventory—just not all at once.
Advantages of Cycle Counting Your Inventory
Cycle counting doesn’t immediately offer benefits like implementing cloud-based software, but over time most distributors see:
- Reduction in costs associated with inventory auditing
- Improved confidence inside and outside the organization to complete orders as promised
- Increased inventory report accuracy
- Decrease in backorders
Cycle Counting Methods
There are two primary cycle counting methods:
- Random Sample Counting: This method involves selecting the number of items you’ll audit at random.
- ABC Cycle Counting: With this method, you’ll segment your inventory based on turnover rate. Assign the fastest moving items an “A.” You’ll count them the most often. Items with a medium turnover rate receive a “B,” and your slowest-moving items will receive a “C.” The items with the highest turnover will be counted most often, ensuring you always have accurate numbers on your fastest-moving inventory.
What is an SKU?
“A warehousing item that is unique because of some characteristic (such as brand, size, color, model) and must be stored and accounted for separate from other items. Every SKU is assigned a unique identification number (inventory or stock number) which is often the same as (or is tied to) the item's EAN or UPC.” — BusinessDictionary.com
A Stock-Keeping Unit number is a unique string of characters meant to represent each individual item type in your inventory. Generally speaking, an SKU starts with the highest priority information first and moves down.
For example, when keeping automotive-related inventory, you may have nearly identical items that differ only in terms of size. So their SKUs would be nearly identical except for some portion of the code near the end.
An SKU sounds a lot like a universal product code (UPC); however, SKUs are seller-dependent. UPCs are 12 numbers, use bar codes, and are the same no matter who is selling the item.
SKU Best Practices
Create Easy to Understand SKUs
Creating easy-to-understand SKUs will make things easier on your employees who will have to use them every day. Don’t use numbers and assign them meaning, i.e. 5 means red. Your employees will have to decode each SKU, slowing down your operations and increasing the likelihood for human error.
Important Information First
Always place the most important information at the beginning. As human beings, that’s the information we want to know first. If an employee searching for a clothing item in your warehouse knows that it’s a shirt and not pants, they’ll move in the right direction sooner.
Avoid Letters That Look Like Something Else
Check out these examples:
- O can be mistaken for 0
- “/” can be formatted as a date (if you’re using Excel)
- Use “-” or “_” for a space
- Never use accents
Most of the items in your inventory have variants where one small characteristic is different, like color. Keep this in mind when you create your SKUs, and use it to your advantage.
You can use SKUs to set reorder points for inventory, which helps decrease out-of-stock instances. Determining the popularity of item variants will also become easy. If you notice a dark blue jacket outsells all the other color variants, then you’ll know to order more of that blue variant.
Implementing a cloud-based inventory-management system is a major factor in launching your company to the head of the pack. Processes like ABC cycle counting and establishing useful SKUs are just a couple of the techniques you can use to optimize your inventory-management system.
Wholesale distributors must now carefully evaluate each area of their supply chain. Every process must be assessed for efficiency. If it doesn’t have a positive impact, then you need a new process. Everything from supply chain relationships to the technology used to manage your inventory must add to your productivity, not hold it back.
Have you recently put your inventory management in the cloud? What is your top recommendation for making the transition as smooth as possible?