A. The select few items that bring in most of your income
B. The OK performers that contribute a decent amount of income
C. The bulk of items that don’t earn much (due to low sales and/or prices)
Pay particular attention to your A inventory, because mistakes in that category can cost a lot of money. The C items require less of your attention. This exercise gives you a framework for prioritising your focus and energy.
2. Understand demand and forecasting
Accurate estimates of what you will need are the backbone of good inventory management. It can seem like guesswork when first starting a business – but it doesn’t have to stay that way.
Use your sales records to figure out what’s hot and what’s not. As time goes by, break sales down into daily, monthly, and quarterly reports so you can spot patterns. Use that as a guideline for placing your orders. You can overlay considerations like promotions, economic conditions, holidays and so on – but use past experience as a basis.
3. Allow for lead times
You can't always pick up the phone and order more inventory for tomorrow. Find out how long it takes to replenish certain supplies and factor it into your inventory management. It’s a simple step but it can help stop you from making the same mistakes over and over again.
Ten ways to look after your inventory
You wouldn't leave a big pile of money in the middle of your shop floor, unattended and unprotected, right? Since inventory has financial value, it's important to look after it sensibly too.