How to Improve Inventory Management: 10 Practical Tips
Quick answer: To improve inventory management, classify products with ABC analysis, focus on the 20% of items that bring most of your profit, audit stock regularly, track sales to set reorder points, fix supplier delays early, train staff to receive and record goods consistently, and use inventory software or a 3PL that tracks stock in real time. The goal is to keep enough stock to ship every order on time without tying up cash in slow-moving inventory.
As a necessary part of fulfillment, inventory management plays an important role in global business, especially in the global dropshipping business. How to improve inventory management effectively is a challenge for many business owners because it directly affects customer reviews.
This page takes a deeper dive into inventory management and gives you practical tips if you want to operate a global dropshipping business without being troubled by the same problem.
What is Inventory Management?
Inventory management means managing the quantity of goods in the logistics process, and tracking inventory from the purchase to the sale of goods. If inventory is too large, capital is tied up and the interest burden increases. However, if inventory is reduced too much, there will be stock gaps. So for most companies, the practical function of inventory management is to keep the balance between stock and sales so that customer orders can be delivered punctually.
Some modern management approaches, such as just-in-time, even treat zero inventory as the ideal.
What is Inventory Management System?
An inventory management system is a database system used by enterprises and units for decision-making and management.
Its main functions are warehousing management, delivery management, receipt and payment management, commodity data management, user information, and customer data management, other income management, and expenditure management, as well as various detailed account queries and other functions.
Why is Inventory Management Important?
Saving Costs
Effective inventory management not only helps you keep a balance between your inventory and your sales, but also helps you handle inventory problems to a great degree. Effective inventory management can help you save money, time, and energy, which you can spend on expanding your business.
Improving Cash Flow
Proper and effective inventory management can help you improve the cash flow in your company, and that will be good for your business running.
Gaining Customers
The key to developing loyal customers is ensuring customers receive the products they need on time without more waiting, and that can help you gain more repeat customers.
How to Improve Inventory Management Level?
1. Use ABC analysis. By putting your inventory into optimized groups, you can clearly know which products you need to source more in amount and frequency, and which are more important to your business but may cost more and move more slowly. Generally speaking, experts suggest business owners segregate their inventory into A, B, and C groups. Products in group A usually are higher-ticket products. Products in group C usually are lower-cost products that turn over quickly. Products in group B usually are moderately priced, and the sales volume of the products in group B usually is lower than group C and higher than group A.
2. Work with a 3PL that tracks stock. Once an order is placed by a customer, professional and reliable 3PL services can help dropshipping business owners track product information in the inventory. A typical example of a 3PL service supplier is Honest FulPhilment, a professional and reliable 3pl service supplier with 18+ overseas 3PL warehouses and 2 months of free storage.
3. Audit your inventory regularly. It is necessary for business owners to audit their inventory because it helps them effectively grasp the running state of the company. The work will be good for their business growth.
4. Fix supplier problems early. An unreliable supplier can make trouble for your inventory. If you have a supplier who is always delayed in delivery or shorts your order frequently, you’d better discuss the issues with your supplier and analyze what caused the problems.
5. Follow the 80/20 rule. In business, 80% of profits come from 20% of inventory. So, it is necessary to optimize inventory management of this 20% of items. You should clearly know the complete sales lifecycle of these products and closely monitor them.
6. Standardize receiving. It is necessary for business owners to ensure all staff receive, inspect and record goods with a strict standard, and that can help you ensure consistency between inventory and sales.
7. Track sales of each product. It is necessary for business owners to track sales of each product so that inventory and sales stay in balance. You’d better clearly know the trend of your inventory and update your inventory totals at a regular period, and that can help you effectively grasp the running state of your company.
8. Restock on time. To provide qualified and enough goods to your customers, it is necessary for you to restock your inventory. As a professional and reliable dropshipping supplier, Honest FulPhilment can help you avoid restocking problems because the company can help you find professional and reliable suppliers, with sourcing quotes in 4–5 days.
9. Invest in inventory technology. It is necessary for you to invest more in inventory management technology because it can help you save time, energy, and capital in inventory management, and you can spend more time, energy, and money on expanding your business.
10. Use integrated tools. It is sensible for you to adopt integrated technologies in inventory management because they can lighten your workload and effectively improve the efficiency of inventory management. The Honest FulPhilment app shows your inventory information clearly.
4 Best Inventory Management Systems for your Dropshipping Business
If you want to spend more time expanding your business, it would be wise for you to employ a professional and reliable inventory management system. Hope the following content can give you a reference.
ShipBob
As a professional and reliable provider of the inventory management system, ShipBob can help users effectively improve the delivery time, reduce shipping costs, and improve the overall shopping experience of customers. ShipBob adopts a powerful combination of connected technology, strategically-located warehouses, and dependable fulfillment services. With ShipBob, inventory management in your business will be easier.
ShipHero
As a type of cloud-based order fulfillment software, ShipHero adopts integrated modules for order management, inventory management, shipping management, and returns management. With ShipHero, you can clearly know the inventory state in your business, and your inventory management will be easier and more efficient.
Katana
As a type of manufacturing ERP software, Katana allows users to make inventory adjustments and automatically calculate operation costs. It can help users effectively handle inventory management such as raw material tracking, production planning, and stock support. With Katana, your inventory can be controlled effectively, and it is good for your business.
Honest FulPhilment
Honest FulPhilment provides 3PL Inventory Management Services. Third-party logistics (3PL) is the process of outsourcing logistics services. This includes anything that involves the management of one or more elements of a business’s procurement and fulfillment activities, including storing and shipping items around the world. You can get more services from Honest FulPhilment.
Honest FulPhilment provides third-party logistics services to meet the diverse needs of customers, which helps increase the number of orders and the customer repurchase rate.
Conclusion
Inventory management is a challenge for business owners, especially for global dropshipping business owners. This article covered inventory management from its definition and benefits to how to manage inventory levels effectively, and some professional inventory management systems you can work with. We hope the above information gives you a reference. If you want to know more about inventory management, welcome to contact us.
FAQ
How can I improve inventory management?
Group products with ABC analysis, focus on the 20% of items that drive most profit, audit stock regularly, track sales trends, set reorder points, fix supplier delays, train staff to receive and record goods consistently, and use inventory software or a 3PL that tracks stock in real time.
What are the 4 types of inventory management?
Four commonly cited inventory management methods are just-in-time (JIT), materials requirement planning (MRP), economic order quantity (EOQ) and days sales of inventory (DSI), which measures how long stock takes to sell.
What is ABC analysis in inventory management?
ABC analysis sorts inventory by value. A items are high-value products that need the closest control, B items are moderate, and C items are low-cost products that sell in high volume. It helps you decide where to focus counting, forecasting and reordering.
What is the 80/20 rule in inventory?
The 80/20 rule says that roughly 80% of profit usually comes from about 20% of your products. Monitor that 20% most closely so it never runs out of stock.
What is an inventory checklist?
An inventory checklist is a record of all items a company holds, with quantities and locations. It is used to track and control stock in an organized way and to check physical counts during audits.