Controlling your Inventory Costs

Many organizations maintain physical inventory on-hand to do their business. Examples include retail stores, restaurants, food banks, construction, and landscapers. Businesses and non-profits need to track all that “stuff” to sell, distribute, or provide services to their customers. Keeping accurate inventory records, knowing when to order more, and minimizing losses (aka “shrinkage”), are essential parts of managing costs and meeting demand.

Automating inventory tracking makes a lot of sense. However, automation on its own does not address everything. For example, your people need to know their roles and responsibilities, such as entering information and reading/acting on system reports. Your business rules and policies need to be set up in the system. How can you do all of that?

If your business or non-profit relies on inventory to do its work, addressing these four important topics will help you control costs and reduce “shrinkage.”

Have enough to meet needs, but not too much

Figuring out what you need on-hand to meet customer demand without spending a lot on storage means looking at your history, customer orders, scheduled jobs, and other factors. How quickly does your inventory turnover? Does it have a “sell by” date? How long do inventory shipments take? Answering those questions will tell you when to set the re-order points in your inventory system.

Organize your inventory with tracking in mind

Setting up your inventory so you can locate, track, and verify each item requires some advance planning. You need to know where the items are located, the unit of measure, and a good starting count. Using standard names in the system for each item helps prevent duplication and other ordering errors.

Record all activity in and out of inventory

Be sure that all additions, reductions, and other inventory changes are recorded accurately and timely so you always know what you have on-hand. Training can help your team know how to perform this important task consistently.

Verify periodically

Spot-checking your inventory on-hand with periodic counts and reconciliations will help you be sure your records are accurate. Verifying inventory shipments before the items are added to inventory will reduce tracking errors, as well as preventing overpaying for damaged or undelivered items.

One inventory tracking solution to fit every need may not be out there. By addressing these four inventory tracking topics, businesses and non-profits can do a lot to control inventory costs and ensure customer needs are met.