Inventory Tracking System For Small Business Pricing Management đź“Š
Have you ever been in a situation where you’ve had too much stock sitting in your warehouses and running costs just spiralled out of control? Or, the alternative scenario, where you just don’t have enough inventory in stock and can’t supply fast enough to your customers? Today, we’ll learn how to create the best inventory tracking system for your small business.
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If you’re experiencing case no. 1, then you know the pain of watching valuable stock sitting there, gathering dust and eating into your precious cashflows. You know what it’s like to listen to your customers call you a supply risk due to the chaotic approaches of business inventory management in a pricing system.
Obviously, no one wants to be the supplier that takes too long to restock. You’ll lose money and your customers become impatient. What’s worse is you’re risking customer churn.
In short, when businesses can’t buy what they need from suppliers when they want it because it’s out-of-stock or when pricing is way off, they go elsewhere. If this is you, your business loses valuable sales that could be worth millions of dollars in revenue, and you get tagged as a risk to their supply.
How can you avoid a supply and demand nightmare?
When you correctly set your inventory’s price correctly, you can accommodate supply and demand dynamics. You also get to create more opportunities to generate healthy cash flows too, without wasting stock.Â
In this article, we will explain how the best business inventory management practices work hand in hand with the right pricing. We will cover 5 key business stages in inventory management and discuss a system with proven pricing strategies used by B2B suppliers.
These apply to price-overstocked products and deal with supply-side issues. Also, we will share some tips with you on improving your inventory management approaches during peak demand.
At Value Culture, we believe that pricing is one of the key levers to make more margin from your stock. Good inventory management enables moving stock efficiently too. This way, you’re not holding stock too long and creating a backlog of costs.
Common Inventory Management Mistakes Small Businesses Make
Small businesses often stumble upon several common inventory management mistakes that hinder their operations and profitability. One prevalent mistake is poor forecasting. Many small businesses struggle to accurately predict future demand for their products. Without reliable forecasts, they may either overstock, tying up capital in excess inventory, or understock, leading to lost sales opportunities and dissatisfied customers.
Moreover, a lack of inventory visibility poses significant challenges. Small businesses may not have real-time insights into their stock levels, leading to inefficiencies and stockouts. For instance, a small retail store may not know when to reorder popular items, resulting in lost sales and frustrated customers.
Additionally, inefficient order management is a common pitfall. Small businesses may lack streamlined processes for placing and fulfilling orders, leading to delays and errors. For example, a small e-commerce business may struggle to keep up with orders during peak seasons due to manual order processing methods.
Furthermore, inadequate storage practices can exacerbate inventory management challenges. Small businesses may not optimise their storage space efficiently, leading to cluttered warehouses and difficulties in locating items. This can result in increased labour costs and fulfilment errors.
To mitigate these mistakes, small businesses can benefit from investing in an inventory tracking system tailored to their needs. By leveraging technology like an inventory tracking system for a small business, they can improve forecasting accuracy, enhance inventory visibility, streamline order management, optimise storage space, and ultimately, boost profitability.
Addressing these common inventory management mistakes and implementing an effective inventory tracking system will help small businesses enhance their operational efficiency and achieve greater success in the competitive market landscape.
What is a business inventory management system?
A business inventory management system assists firms in tracking processes from the manufacturer or distributor through storage and sale. They also have features that provide analysis into your efficiency as well as industry-specific functionality.
An inventory management system, for instance, can be a combination of hardware and software that monitors and handles product inventory, sales, and other manufacturing processes. Having a business inventory management system has advantages. For starters, it reduces human errors, which leads to cost savings and fewer purchases. It also boosts efficiency and productivity by streamlining management processes.
Before settling on an inventory system for your company, learn about your inventory tracking necessities. Smaller firms, such as retail outlets, often employ a basic inventory system, whereas B2B businesses require a system with more arrangements or accounting functions. Larger companies require something more sophisticated, such as an enterprise resource planning (ERP) system.
Benefits of Implementing an Inventory Tracking System for Small Businesses
Implementing an inventory tracking system for a small business offers numerous benefits that can significantly improve operations and boost profitability.
Firstly, improved inventory accuracy is a key advantage. With a tracking system in place, small businesses can track the movement of their inventory in real-time. This reduces the likelihood of errors such as stockouts or overstocking, leading to better inventory management overall.
Additionally, enhanced efficiency is another benefit. Manual inventory tracking processes can be time-consuming and prone to errors. By automating these processes with a tracking system, small businesses can save time and resources, allowing employees to focus on more value-added tasks.
Moreover, better decision-making is facilitated by the data insights provided by an inventory tracking system. Small businesses can access detailed reports and analytics on their inventory levels, sales trends, and demand patterns. This enables them to make informed decisions about purchasing, pricing, and stocking levels.
Furthermore, cost savings are a significant advantage. By optimising inventory levels and reducing instances of stockouts or overstocking, small businesses can minimise holding costs and avoid unnecessary expenditures. This leads to improved cash flow and greater financial stability.
Additionally, customer satisfaction can be greatly enhanced. With an inventory tracking system, small businesses can ensure that they have the right products in stock when customers need them. This reduces the likelihood of stockouts and delays in fulfilment, leading to happier customers and repeat business.
Ultimately, implementing an inventory tracking system for a small business offers a multitude of benefits, including improved inventory accuracy, enhanced efficiency, better decision-making, cost savings, and increased customer satisfaction. By investing in such a system, small businesses can streamline their operations and position themselves for long-term success in the competitive marketplace.
What are the best inventory management system approaches for a small business?
1. Push Approach
The push technique is a means of moving things from the manufacturers to shops, warehouses, or enterprises. A consumer or employee will acquire or use the product from the available inventory. To successfully implement this strategy, a company must accurately estimate product demand. Knowing how much of a product is demanded and when is critical.
2. Pull Approach
A retailer, warehouse, or business uses the pull approach when a consumer or employee requests an item. Instead of travelling down the supply chain, an item climbs up. This technique is typically used for speciality items, particularly luxury, or those with little or irregular demand. However, the pull method is not for every firm, especially if clients can get an identical product from some other source right away.
3. Just-in-Time (JIT) Approach
The just-in-time approach is comparable to the pull approach in that an organisation orders inventory just in time to meet a customer’s order or a company’s necessity. Executing this strategy involves dependable suppliers, distributors, and third-party logistics. Without them, a company may fail to fulfil client demands.
Choosing the Right Inventory Tracking System For a Small Business
Selecting the appropriate inventory tracking system for your small business is a critical decision that demands careful consideration. Firstly, assess the unique requirements of your business. For instance, if you deal with perishable goods, a real-time tracking system is paramount. Conversely, if you operate an e-commerce store with a vast product range, a robust software solution with SKU support may be preferable.
Next, weigh the costs and scalability. It’s essential to choose a system that aligns with your budget while providing room for growth. For instance, while a basic spreadsheet might suffice initially, it can become cumbersome as your business expands. Investing in inventory management software like QuickBooks or Zoho Inventory may offer more long-term efficiency.
Lastly, consider ease of integration and user-friendliness. Ensure the chosen system can seamlessly integrate with your existing processes and technology stack. For instance, if you run an online store on Shopify, selecting an inventory management app compatible with the platform simplifies operations. Furthermore, prioritise systems with user-friendly interfaces, as they reduce the learning curve for your team, leading to quicker implementation and fewer errors. Making these considerations will lead to a well-informed decision that aligns your small business with the ideal inventory tracking system.
How Inventory Management System Works For Your Small Business
Inventory management is part of a business’s supply chain management. It ensures that the business has the right products in the right volume (for sale), and at the right time. When will a specific line of products run out? When should you restock? What are the costs of those items that aren’t selling well?
Basically, you need to have a good understanding of managing your inventory. It involves tracking every item of stock that you have. That refers to products, components/ingredients, goods in stock, production, and sales.
But, a good business inventory management system goes beyond just this. For instance, you thoroughly need to check the difference between dependent and independent demand or forecast demand to plan ahead. This is especially useful if you want to grow your business in different regions.
1. Opt for a cloud-based inventory management system
Did you know that spreadsheets contain errors? They’re also outdated and slow to update real-time information. Aside from that, it doesn’t sync nor integrate with other analytics tools or data management systems.
It doesn’t have the features of the latest inventory management software that allow you to add or track products and sales channels. So, monitoring sales will often involve manual data entry and calculations which can take much of your time and are prone to human errors.
Cloud-based inventory management systems also prompt you when stocks are low. It also increases productivity with shareable features that can be conveniently sent to cross-functioning teams in your department.
2. Tracking your inventory helps make important decisions for the profitability of the business
With a touch of a button, you can easily access details and receive notifications for sales data and analytics through your sales platforms, the best-selling and least-selling items, compare supplier costs, and automate re-ordering in-demand stocks on the go.
A modern inventory management system saves you time and ensures data accuracy, free from manual error entries. It lets you focus on other aspects like marketing, product development, and growing the business.
Using mobile technology cuts costs on overstock and helps you keep track of major business processes from home and elsewhere. For instance, barcode scanning makes tracking and providing receipts faster. It automates recordkeeping smoothly and eliminates the need to triple-check your data.
Types Of Inventory Tracking System For a Small Business
1. Periodic Inventory Management System
Rather than tracking inventory every day, a periodic inventory system charts inventory at the end of an accounting period, which can be weekly, monthly, quarterly, or yearly. Furthermore, the system does can be operated by hand and manually recorded in journal entries. Periodic inventory systems are typically used by businesses that sell few items. A local car accessory store, for example, would use the periodic system because stock levels are simple to record and track.
2. Perpetual Inventory Management System
Inventory is constantly tracked by perpetual inventory management systems. As a result, inventory levels are automatically updated. Purchases and returns are documented in inventory accounts immediately. Bigger companies and those with a large number of inventory units are more likely to use this type of business inventory management system.
3. Barcode Inventory Management System
Barcode business inventory management systems utilise numbers to distinguish each product sold. The barcode numbers can depict a variety of details about the product, such as the manufacturer and supplier the product’s placement, mass, the quantity of each item in stock, etc. This type of business inventory system can benefit companies with high inventory levels. It can assist in avoiding manual system errors and collect the most precise and up-to-date inventory statistics.
4. RFID Management System
Radiofrequency identification (RFID) business inventory management systems go beyond barcode systems. They can read labels from several feet away and do not necessitate scanning in line of sight. Enterprises with large warehouses or distribution centres with multi-level stockpiling may benefit from this type of system.
What are the approaches and components of a small business inventory management system?
When value components of inventory management and pricing systems are weak, a company loses out on profitable revenue growth. They end up with a stock that not a lot of people need. When this happens, the running costs of the business spiral out of control and you may be tagged as a supply risk.
To avoid this nightmare scenario, we will discuss some listed tips for creating a free template for an inventory tracking system for a small business:
Concentrate on the needs of the business. Managing a warehouse full of inventory can be an intimidating task. So, determine which items are most important and concentrate on these first. Then, keep the top-selling products in stock. It’s a great start to keeping your customers happy.
Stocks can belong to a periodic inventory which needs “periodic” monitoring every 3 to 6 months. While perpetual inventory needs daily or frequent monitoring which includes marking items as produced, received, damaged, replaced, sold, and returned. Both undergo quality checks and stock level accuracy.
Manage supplier relationships. This is significant, especially for stock-based businesses. This way, you’ll secure a reliable supply, acquire competitive pricing, and gain knowledge on emerging trends that may affect your business.
Inventory management systems help businesses to stay on top of their inventory. As all businesses have their own unique needs, it’s important to choose a system that matches yours. For example, a global stock-based company like Amazon needs a multifaceted solution that accommodates a huge number of orders processed every day.
Check your competitor’s stock levels and pricing. With the use of competitive intelligence software, you can determine your competitor’s stock availabilities. Then, you can set the most competitive prices on your competitor’s out-of-stock items. Apart from this, you can also track what prices they’re selling at and their volumes. Here’s our guide to pricing tools software.
Here are the latest top picks by Fit Small Business and business.org for the best inventory management software. It’s ranked based on different types of software best suited for B2B retail, restaurants, accounting, barcodes and product tracking, specialty shops, and eCommerce.
5 Key Stages of an Inventory Tracking System For Small Business
It may seem daunting but stock inventory management is much easier to understand and handle when each stage is broken down. Below are five major stages of how your products start from the suppliers, go into the warehouse, and down to the customers.
- Purchasing raw materials to produce goods or products that are for sale with no assembly needed. In this case, it’s important to use a first-in, first-out approach. That means the first items that were bought must be sold first. This is especially applicable to perishable goods such as food, cosmetics, medicine, and flowers.
- Manufacturing or production for companies that are involved in manufacturing. In the case of wholesalers, they can skip this step entirely.
- Storing the raw materials just before they’re produced or manufactured – The finished products shouldn’t be kept for too long. In fact, the FIFO approach applies to non-perishable items so they don’t end up stuck in storage until they’re damaged and eventually become unsellable.
It’s best to store older products in the front and place the recently purchased items at the back. This gives you an effective chronological order of storing your stocks in terms of the time of purchase
- Sales. Once again, it’s best to use the FIFO approach right from the purchase to storage, then selling the items to customers. Which products have a higher value? Which ones are the most expensive? What are the items that occupy the storage the most? Identify the least expensive products. What items are in between? Categorise them into ABCs.
- Reporting, tracking, and recordkeeping the numbers and data for each sale, covering volume growth, revenue, management, stock levels, and profitability.
Apart from managing these key phases, businesses need to price their stock and optimise their go-to-market strategy. A suitable price can help distributors and manufacturers manage supply and demand dynamics.
Approaches and components of an inventory tracking system for small business
- Creating an up-to-date business inventory system helps businesses maintain stock levels. There must be a tracking system for products that are selling the most and those that aren’t. This can also help decrease business costs and further increase sales.
- Businesses can get rid of overstock through annual auditing of inventory management and pricing systems. So, be sure to check your competitor’s out-of-stock products through intelligence software.
- With the help of technology storing your items in chronological order helps minimise overstocking. Consider this for seasonal products and services too. On the flip side, a frequent shortage of inventory or stock risks customer churn (they buy from competitors.)
- How a business takes care of order quantities, safety stock, replenishment cycle times, seasonality, and forecasts, is very important. It’s best to adjust each operation based on your specific business needs and track what works and what doesn’t.
Inventory Tracking System Best Practices For a Small Business
Implementing inventory tracking system best practices is essential for small businesses to optimise operations, enhance efficiency, and control costs. To begin, establish clear processes and workflows for tracking and managing your inventory. For instance, create a standardised system for labelling and categorising items. By adopting a consistent approach, you’ll reduce errors and improve accuracy. Transitioning from manual counts to automated barcode scanning, as seen in retail, can save time and minimise human errors.
Furthermore, conduct regular audits to ensure the accuracy of your inventory data. Routine checks can help identify discrepancies and prevent issues such as overstocking or stockouts. Implement a system for cycle counting, where a subset of items is counted regularly rather than conducting a full inventory count. This approach ensures that your records remain up-to-date and that any discrepancies are promptly addressed. Consider using inventory management software that offers real-time tracking and reporting capabilities.
Lastly, prioritise supplier relationships and communication. Maintaining open lines of communication with suppliers can help you address issues like late deliveries or quality concerns promptly. Establish reorder points and safety stock levels to prevent stockouts, especially for high-demand items. By proactively managing supplier relationships and strategically setting inventory levels, you can avoid costly disruptions to your small business’s operations. These best practices will not only improve your inventory tracking system but also contribute to overall business success.
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Bottom Line
Inventory control is part of the supply chain management of a business. It helps ensure that companies minimise slow growth, and increased costs, and bring flexibility and accuracy in terms of product volume. This largely relies on the size of the business, its model, and the types of products or services.
The best approaches to timely inventory management aid the business in meeting its objectives. That includes sales forecasts, calculations, and figures that predict growth and market trends.
Moreover, businesses should consider the value of the closing stock (trading stock at the end of each income year) and the opening stock (at the start of the next income year). There has to be a balance between overstocking and product shortage as both bring customer and profit loss.
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