What should a shop owner know about inventory management?
- The definition of inventory management
- The reason why inventory management is important
- The process needed to improve your inventory management
The concept of what inventory management is in the Philippines is still quite unknown to some. In most cases, inventory management is simply listing down what you have in stock and updating it whenever a sale is made or new stock is acquired. A lot of small business owners don’t see just how crucial effective inventory management systems really are. Because of this, a lot of them experience numerous problems with their inventory, often leading to poor business decisions, or worse, going out of business.
With that being said, inventory management is something that every business owner should have at least a basic understanding of. Effective inventory management is one of the signs that a business will be or is already successful. In the Philippines, even the basics of inventory management are not well-known among new businesses. That is what this article aims to solve, so here’s a short introduction to the basics of inventory management in the Philippines!
The Definition of Inventory Management
Inventory management is the organization and bookkeeping of your entire inventory. This starts from the items becoming your assets, all the way until the finished product lands onto a customer’s hands.
It includes everything in between, namely: inventory management levels, stock labeling, tracking of purchase orders, reorder dates, supply and demand forecasting, inventory costs, variants and so much more. Basically, everything that is included in the organization of all the aspects of your inventory in your business.
Inventory management also talks about predicting demand and ordering inventory so that your costs are at the minimum while your profit is at the maximum value.
The Reason Why Inventory Management is Important
Inventory management, on its own, is a complex subject, but a basic understanding of it is enough to get small businesses going. Now, this concept may be new to some aspiring business owners, but it’s necessary for your operations — be it big or small. To some, the effects of inventory management are not immediately visible. But once you begin to apply it to your business, that’s when its true value is felt.
Effective inventory management is important to your business because of its direct relationship with one of the most valuable assets that you can have — your products. In every retail business, there’s a direct link between inventory levels and the profits that they make. In a way, the inventory is likened to an investment that is on up until the item is sold or is used to manufacture another item.
Another basic point when it comes to inventory management is a business’ reliance on having items in stock. Although today, you don’t have to physically have items at the ready in your physical location thanks to shipping methods and deliveries straight from the warehouses, the fact of the matter is that a business needs to have products in stock for them to sell and eventually profit. If a problem arises in this process, customers will simply go to one of your competitors who can provide what they need right now.
Inventory management is also crucial it is when it comes to monitoring the company’s inventory as it moves through the production and sales process. Recording and tracking things such as customer orders, shipping costs, stocks, and sales can give a huge advantage to your business. An inventory management software is a great way of ensuring organized bookkeeping and automated tracking of your inventory, but simply filling up your log book with organized location names, understandable and visible labels, unique item numbers, units of measurement, and good initial counts are already good policies.
The Process Needed to Improve on Your Inventory Management
Improving your inventory management doesn’t mean that only the top brass should learn it — your employees should know about it as well. Here’s a short step-by-step process on how your team can brush up on inventory management!
- Educate your team – You don’t need to change the people in your team to improve your inventory management. Most of the time, it would be best if you share the knowledge of what needs to be done and build up from there.
- Set a clear objective – Most of the time, a business’s inventory is just that, a resource for products that lead to profit. There are many inventory management strategies and tactics that can help improve the system in terms of accuracy, timeliness, higher rates, and the like. All you have to do is plan out your goal and strategize on how you’ll achieve it!
- Look at it from a larger perspective – Sometimes, problems in inventory management aren’t as obvious as it seems. The most optimal way to do things is to look at the whole process. By doing this you’ll identify even the smallest bump in the inventory flow and eventually end up with the most ideal solution!
- Document everything – tracking everything is easier when you have a reliable database. Keep up with your whole inventory management process by documenting everything!
- Develop an action plan – finally, after establishing an end goal and identifying the things that need to be changed, you now have to strategize and come up with tactics that will be able to solve and improve on the following opportunities for improvement!
Now that you have a basic grasp of what inventory management is in the Philippines, you should be able to find ways to improve your inventory management process little by little. Soon enough, your business, like every other company that has highly effective inventory management, will find its success. It’s only a matter of time!