How to make improvements to inventory control in 2023
Inventory is the backbone of retail and manufacturing companies, and managing it as it moves through the supply chain is a crucial task for businesses. From ordering to storing to using inventory in manufacturing processes or shipping it out to customers, there has to be oversight to ensure there’s always enough stock to meet demand.
Managers and company owners have to balance this demand with the cost of both the product and storing it. That’s what inventory control is all about. We’re going to look at the ways good inventory control makes businesses more efficient and put forward ideas to make the system better.
Why inventory control is important
More chance of items staying in peak condition
Any stock that’s damaged in storage is a financial loss for your company. Inventory control can reduce or eliminate damaged goods by tracking items closely as they move through the supply chain. When carried out thoroughly and accurately, stock gets rotated through the system faster. This means items spend less time in storage where they could sustain damage, resulting in a higher probability of goods being top quality.
Maintains the right levels
While there always has to be enough in stock to satisfy demand, having too much of any item is not good for the bottom line. Good inventory control finds those correct levels, ensuring they’re maintained while adding a bit more for emergencies – safety stock.
When the inventory control is on point, all the information needed for an audit is at your fingertips. This saves a company time and money.
Inventory control doesn’t just mean keeping a close eye on stock as it moves through the supply chain and its levels in storage, it also provides data about which items are selling and which are not. This informs buying decisions, ensuring you’re not left holding unwanted stock. Unwanted stock is a drain on resources, both space in the warehouse and finances.
Ways to improve inventory control
Create a good floor plan.
A good floor plan in a warehouse makes everything easily accessible and facilitates movement around it, giving a boost to productivity. To achieve this, items that move faster should be upfront, heavy items should be in low shelving, and walkways should be easy to navigate. Signage that’s large and clear needs to be posted everywhere too. It’s how warehouse workers find their way around.
Strengthen relationships with suppliers.
Good relationships come down to communication, and that starts with getting to know the contact person at each of your suppliers. When you have a dialogue, you build trust, something that, in turn, puts you in a position to negotiate better rates, return anything unsold, and turn your purchase orders around faster.
Use a warehouse management system.
An inventory control system keeps tabs on items as they move through your entire supply chain, and a warehouse management system maintains complete oversight over the storage facility. Adding a warehouse management system increases efficiency and reduces errors and confusion.
Conduct regular audits.
It’s important to know that your financial records accurately reflect the stock you actually have. That’s why you have to conduct these audits regularly. Fortunately, your inventory control system makes this relatively easy and painless.
For your supply chain to work as efficiently as possible, every item has to be clearly and correctly labeled. Nowadays that means using barcodes, QR codes, and scanners. These digitized systems also help with real-time inventory control.
Inventory control systems collect and store a lot of data, and the data can be incorporated into reports about your inventory. These reports can contain information that stretches from stock levels to items that are out of stock to items that have become obsolete to financial statements. Configure this information in whatever way you want, but do produce the reports regularly. It will help you keep oversight on your business.
Basically a quicker and more efficient method for stock taking, a cycle count only involves a small section of the warehouse at a time. It’s usually practiced as a continual process, systematically working from one end of the facility to another, then starting at the beginning again when the process reaches the end. Cycle counting means you don’t have to shut operations down for a few days, as with traditional stock audits that count everything at the same time. In addition to keeping the supply chain in running order, counting a section at a time like this is actually more accurate.
Having good control over inventory is essential for a business to thrive.Cin7 Omni can be a great help. With an array of tools to track inventory and maintain good levels, you’ll have the control you need to have. Our experts are standing by to tell you more and give you a demo. Click here to schedule a time that’s right for you.
What is the B2B2C model? What should you consider in setting up a B2B2C model for your business?
The U.S. Census Bureau News reported that the retail ecommerce sales for the first quarter of 2022 crossed $250 billion, an increase of 2.4% from the fourth quarter of 2021. It represented 14.3% of the total retail sales. The B2B2C model is the latest addition to the ecommerce scene. Let’s learn some more about the B2B2C model.
You have seen businesses that operate on the business-to-business (B2B) model. You have also seen companies that work on the business-to-customer (BTC or B2C) model. Both the models have been successful in their own ways. Now, a new model is creating waves in the ecommerce market – business-to-business-to-customer (B2B2C). If the B2B and B2C models were successful, why should you involve another business between you and the customer? Let’s talk some more and find out about the B2B2C model.
What is a B2B2C commerce model?
A B2B2C commerce model is where one business (B1) involves another business (B2) to sell goods or services to its customers (C). If any of the involved companies use the internet to sell goods or services, it is called the B2B2C ecommerces model. In the B2B model, the businesses sell their goods or services to other companies. And in B2C, the organizations sell their wares directly to the end consumers. The B2B2C commerce model is the culmination of both these models.
So, what was the need to involve another business in the channel?
The market was limited when business was done mainly through physical channels. But with the development of ecommerce, suddenly, the markets became wider and the possibilities for business unlimited. However, it was not possible to have it all without a little bit of assistance. If one company had the product and the other company had the means to reach the consumers, they could join hands to increase the business multifold.
The following figure shows the concept of the B2B2C commerce model:
The first company provides the goods under its brand name, whereas the other company provides additional services, including lead generation, transport, credit, maintenance, and digital payment services.
In Figure 1, you can observe the following steps happening:
- The manufacturer provides goods to the network seller to sell.
- The network seller provides customer information and sales platform to the manufacturer in return for annual fees.
- The network seller uses the services of a payment gateway to receive payment securely.
- The customer buys the goods from the network seller, fully aware that the seller is not the manufacturer.
- The customer makes payment and receives goods from the network seller.
- The network seller makes the payment to the manufacturer.
This is a classic example of the B2B2C ecommerce model. You might have gone through a similar process when buying goods from sellers, including Amazon, Flipkart, or eBay.
How are B2B2C and white-labelling different?
One shouldn’t confuse B2B2C with white labelling. White-labeling is a process where the company manufactures the goods without its brand name and sells them to other businesses. These companies sell the goods under their own brand names. So, basically, the consumers are unaware of the origin of the goods. On the other hand, in B2B2C, the customers know the goods’ origins well.
For instance, some drug manufacturers provide generic medicines to other organizations. These organizations pack the drugs under their own brand name and sell them to consumers. Consumers are unaware that the drugs of two or more brand names come from the same manufacturer. They purchase goods trusting the brand name. This is called white-labelling. And in turn, the brand holder ensures the quality of the goods. On the contrary, if you are buying Nike sneakers from Amazon, you know that Nike is the manufacturer, not Amazon. This process is called B2B2C ecommerce.
Examples of real-life B2B2C commerce models
If you think that B2B2C is a concept in its initial stage, you might want to rethink it. Many organizations use B2B2C ecommerce in today’s market. Here are some of the examples:
Intel manufactures computer processors. Intel has teamed up with original equipment manufacturers (OEMs), including Dell, HP, and Lenovo, for marketing/branding purposes. The synergy brings trustworthiness among the customers and thus increases sales.
Amazon is an online platform for trading any type of goods. The sellers can retain their brand name while using the network base, logistic facilities, and payment gateways provided by Amazon. This increases their turnover. In return, Amazon gets fees for the facilities they provide.
Apple has devised a plan to help its customers download reliable applications and games from an Apple-approved space. It is called the App Store. It ultimately allows Apple to earn more revenue.
The US giant Affirm is a financial organization that facilitates the customers in buying goods at present and paying later. Affirm collaborates with men’s and women’s fashion, sports and fitness goods, jewellery, electronics, and furniture brands to assist consumers in buying.
UberEats partners with the local restaurants to deliver food to the customers. The customers can enjoy the food served by any restaurant from their homes. The restaurants make more sales than they can do remotely. Uber Eats gets a commission from every delivery they make.
What are the advantages of the B2B2C commerce model?
Many companies are morphing their businesses with others to reap the benefits of the B2B2C commerce model. Every organization has something to offer to the other and two organizations would merge depending on their strengths and weaknesses. Although the advantages of the B2B2C model vary in every synergy, here are some of the common ones:
The primary goal of any business is to maximize profits, and scalability is a way in which they can achieve their goal. Scalability represents the ability of an organization to increase the output by adding resources. Instead of trying to do everything on their own, companies can adopt the B2B2C model to achieve scalability. They can partner with an existing company already providing the given services to increase growth.
Digitalization is the way to scale your business. You can widen your customer base by taking your business online. However, going online needs additional setup and management capabilities that are not available to everyone. Partnering with other companies specializing in these fields is a way to go forward. For example, instead of selling on your website, you can start selling on ecommerce platforms like Amazon or eBay to test whether you receive a good response. They can give you access to a client base you didn’t have before.
In the B2B2C commerce model, you can sell your goods with your brand name. As your customer base grows, your brand image grows too. More and more people will recognize your products, and their reviews can bring in more customers. You can take on any competition when your brand value increases.
Scaling begs for massive investment. Instead of starting an in-house unit, if you collaborate with another team to provide the facilities you require, you can save on setup and maintenance costs. Moreover, the cost of consumer data collection can be shared by all the relevant parties. Start-up costs, marketing costs, distribution costs, and customer acquisition costs can be controlled drastically by employing the B2B2C model.
When the manufacturers team up with the maintenance companies, the customers can get faster services. This will encourage the customers to buy from a company that provides faster after-sale services. The same principle applies to the companies that can deliver the products faster.
The customers benefit significantly from the B2B2C models financially and otherwise. The companies can transfer some of the cost-saving to the customers as discounts. The customers also get the facility of dealing with just one company for their multiple needs. So, it becomes more accessible and more straightforward for them. For example, if a customer buys a television from a store and gets the facility of paying in installments from the same store, they would prefer it. Some banks and financial companies provide such facilities to customers in association with the stores or manufacturing companies.
What are the challenges to set up a B2B2C commerce model?
If you are a B2B business or a B2C business transitioning to the B2B2C model might take some time and effort. However, once you are done, the benefits are numerous. Marc Benioff, the chairman, and CEO of Salesforce.com Inc. said, “We really see every B2B company and every B2C company becoming a B2B2C company.” Some of the challenges faced by the businesses in setting up B2B2C commerce or B2B2C ecommerce model are as follows:
Identification of area for B2B2C partnership
As a business owner, you should know whether you can benefit from the B2B2C model. Some products are not suited for such models. Secondly, you should determine whether you can cope with increased demand. If you cannot produce more to keep up with the increased demand, you might face embarrassment in your business circle.
There are mainly two types of business integrations – horizontal and vertical integrations. Horizontal integrations mean increasing the capacity of the pre-existing unit and producing more of what you are already manufacturing. On the other hand, vertical integrations involve taking up one or more stages of the supply chain in addition to the existing one.
One of the significant decisions you should be making is the area where the other business can help you. You should identify the area in which your organization needs support. For instance, if you can sell your product with an extra warranty, or you can sell more if you have a logistic partner, or if you need access to customer databases to identify your customers. By identifying a particular niche, you can narrow down on potential organizations that can help you achieve your goals.
Management of inventory
When you sell on multiple channels, it becomes cumbersome to manage inventory in real-time. Imagine a scenario where you have a brick-and-mortar store and sell your goods on multiple ecommerce platforms. If you run out of stock while simultaneously operating on all, and the stock on ecommerce platforms is not updated, you might find yourself in some soup. You might actually sell more goods than you have on hand. Therefore, inventory management is one of the crucial challenge areas of the B2B2C ecommerce model.
The solution – adopt a reliable inventory management software that will help you maintain real-time inventory of all your products. An inventory management software can help you keep real-time stock of all your goods in your locations.
Sharing the advantages always comes with sharing the limitations. When you adopt the brand name, it might also lead to the issues it faces. And, you don’t want yourself marked ‘guilty by association.’ It is advisable to check every aspect of the company before entering into a contract for B2B2C. If the company’s goals are not in sync with yours, you might want to reconsider the association as your brand image is online.
When two businesses merge, they both must have IT systems compatible with each other to transition without any hindrance. If not, you should hire an IT expert who can assist you in morphing the two systems seamlessly.
Both the companies should agree on and lay out clear boundaries of contributions towards the achievement of the common goal. The agreements should be reached with mutual consent and followed by all the parties involved.
In the case of B2B2C commerce, the businesses involved getting access to private information about the other business. There should be clearly defined legal agreements to protect the stakeholders’ privacy and sensitive information. Legal teams representing both parties can work out solutions that are to be adopted for more robust security.
Final thoughts on B2B2C commerce model
B2B2C commerce models are the way forward in today’s economy. If the businesses want to tackle competition by expanding their prowess, B2B2C models are the perfect solutions. These models provide customer satisfaction akin to B2C models and growth like B2B models. B2B2C ecommerce models can help you elevate your profitability and margins by combining the best of both worlds.
Automating the B2B2C ecommerce model on Cin7 can help you maneuver the process in a simple way. You can click here to know more about the Cin7 software.
8 ways to get the best out of warehouse inventory management
A manufacturer’s inventory is its lifeblood, the basic ingredients for whatever is being made. When it comes to storing materials in the warehouse, there has to be enough materials on hand at all times, and they have to be in good condition. If these requirements aren’t fully met, a factory could shut down. Therefore, managing inventory in the warehouse well is incredibly important.
Warehouse inventory management is part and parcel of inventory management. Both involve overseeing and controlling stock and its levels, but whereas inventory management concerns the entire supply chain from ordering to delivering, warehouse management is about just the inventory in the warehouse. Let’s look at eight practices for streamlining inventory management in a warehouse.
8 practices to streamline inventory management in the warehouse
1 Have a floor plan that promotes efficiency.
The overall design of the storage facility is a critically important factor. The layout will determine how staff and machinery maneuver the space, as well as how items are placed in, and removed from, storage. When the floor plan is a good one, inventory can be moved in, out, and around the area in a simple, free-flowing stream; when that isn’t the case, bottlenecks and errors can occur.
There are three basic designs for warehouse layouts:
- L-shaped: Here, storage is on the long side while a loading/unloading dock is situated on the smaller adjacent side.
- U-shaped: The ends of this shape are reserved for loading and unloading respectively, and the long curved area is used for storage.
- I-shaped: Basically a long oblong, a loading and unloading dock is placed at one end and the rest is taken up with storage.
These three floor plans have come to be recognized as the ones that work best for warehouse design over time. This isn’t just because they’re good for flow; however, the efficiency they create is reflected in the bottom line.
2. Organize the storage space with flow in mind.
What we’re addressing here is the frequency with which items are needed, and using that measure to gauge where best to place them. You have:
- Fast-moving items: These are the ones that are most in demand.
- Slow-moving items: They’re used, but not very often.
- Non-moving items: Rarely used, or no longer needed.
For the most efficient placement, fast-moving products should be placed near the front and be as easy to get to as possible, while those used but less in demand can be further back. High racks and difficult-to-access areas can be reserved for those non-moving items.
3. Track inventory accurately.
Knowing exactly what you have in storage is the core of good warehouse inventory management. While it’s relatively easy for small companies to keep on top of this, it becomes increasingly difficult for businesses as they grow. For them, technology is a necessity.
Inventory management systems (IMS) use barcodes and QR codes to track inventory. QR codes can hold much more information than barcodes. In addition to storing information about a product, QR codes know exactly where each item is stored, so they are much better for larger facilities. An inventory management software like Cin7 Omni, can maintain an accurate record of warehouse stock, letting you know exactly what’s there and tracking it as it moves in and out the storage area. This is the kind of information you need to manage the inventory on a daily basis.
4. Hire a warehouse manager you have confidence in.
The importance of the warehouse manager cannot be overstated. They don’t only oversee the pool of staff that works in the warehouse, they’re in charge of the inventory itself, making decisions every day about where to store it and when to move it. If they don’t do this in the most efficient way possible, goods can be damaged and extra costs can be incurred.
Warehouse managers should be tech-savvy. They need to be able to operate the software and handle all the automation and machinery that moves the inventory around from robots to forklifts.
5. Put a good workflow in place.
The workflow in a warehouse starts the instant inventory is brought into the building and ends the moment it leaves. It covers all the processes involved in moving the items around, including administration. Individually, warehouse workflows depend on the design of the facility, the product, and frequency of its use. Warehouse flow is usually the province of the warehouse manager. He or she will make the decisions about how and where inventory is stored and when any of it should be moved.
A well-thought-out plan will ensure unheeded flow of the inventory and make the best use of workers’ time. Like any business plan, though, workflows should be revisited often so that updates and tweaks can be made in response to any changes.
We’ve already discussed the benefits of using inventory management software to keep tabs on stock that’s in the warehouse and know at all times exactly what’s in storage. But these IMS systems can actually do much more. They can:
- Register goods as they’re received,
- Classify the goods,
- Direct where the goods should be placed in warehouse,
- Note where goods are stored and keep track of their quantity,
- Instruct how to make the best use of the storage space,
- Track the goods as they move around the warehouse,
- Store and issue shipping instructions,
As mentioned, Cin7 Omni is a good way to automate. As a complement to the functions listed here, the software will increase the speed, accuracy, and security of the inventory management process. It also reduces the employee workload, including that of the warehouse manager, leaving them free to take on other tasks.
7. Have visual oversight of the facility.
Theft, unfortunately, is a fact of life, and the possibility of it happening has to be taken into account when discussing inventory management in the warehouse. One way to stop theft is by putting up closed-circuit surveillance cameras and security systems like alarms. Letting only essential workers into the warehouse space and having them sign in and out when they report for work and go home can also be a help with this problem.
8. Carry out regular inventory audits.
Even when the inventory in your warehouse is automated, audits are necessary. In addition to checking to see that the information in your financial records tallies with the records you’re keeping on your storage space, audits are a great way to point out items you don’t need to keep any longer. These could include items that have been there for so long, they’ve gone out of style and can’t be used, or, for food, have passed their expiration dates. Apropos of #7, theft, an audit will also throw into sharp relief goods that may have “walked.”
A critical factor in warehouse inventory management, audits can be carried out internally by a member of management or externally by an outside agency. Either way, when conducted regularly they ensure that the records kept on inventory are as accurate as possible, and that, in and of itself, is a major cost saving for the company.
The bottom line
The way inventory is managed in the warehouse has repercussions both for the efficient handling and tracking of the stock and the bottom line of the company. We’ve laid out eight aspects of inventory management and have suggested measures that can be put in place to get the system working at its best. Hopefully, you’ll find them helpful in streamlining your system.
We think you’ll find Cin7 Omni a good tool to achieve this. To find out more about how the software can improve inventory management in your warehouse, click here to book a demo.
How to identify bottlenecks in the supply chain, and ways to prevent them from happening
Any company aims to have their operation run so smoothly and efficiently that they’ll have minimal outlay and make maximum profit. Sadly, many fall short of that goal because of holdups along their internal supply chains. These holdups create bottlenecks, jams in the system that slow the process down at the point they’re happening and have a domino effect on everything that follows.
In this blog, we’re going to look at overarching causes of these bottlenecks and put forward ways to overcome them or, better yet, ways to prevent them from happening in the first place.
Bottlenecks defined and how to spot them
The term literally comes from the shape of a bottle, specifically the way the top of it – the neck – is narrower than the bottom. As this shape restricts, or slows, the flow of liquid when it’s poured out, so, in a manufacturing process, a bottleneck is where there’s an obstruction that holds everything up.
It is, of course, essential for a manager to know where these bottlenecks are occurring, to find these obstructions, and the best way of doing this is to conduct a “bottleneck analysis.” That basically involves taking a close look at every step in the supply chain, from the beginning – receiving raw materials – to the end – the final product, and everything in between.
Common areas where bottlenecks happen
While individual companies will have bottlenecks in their supply chains that only apply to them, there are general areas common to all that can also cause obstructions in the workflow. These areas are:
It’s important to have the right amount of employees to carry out a particular task; too many or not enough and inefficiencies creep in. It’s equally important to assign tasks to those that have the right skill set for them; again the over- or under-qualified will slow operations down.
Typically, workers fall into four categories:
Making the best use of the talent each worker brings isn’t the only consideration for management when it comes to labor. Employee morale is important too. Employees who feel valued and have job satisfaction work better. This includes making sure one department isn’t favored over another. Allowing that to happen could create interdepartmental rivalry and could lead to a bad working environment for all.
Misuse of labor in any of the ways described above will affect the speed of the workflow and be the reason for bottlenecks.
Capital for a business is divided into fixed and working. The former applies to permanent assets like factories, warehouses, and equipment, while the latter refers to liquid assets, those finances needed to run the company day to day like payroll, bills, and inventory.
While having enough capital is, of course, important, it’s also essential to use the money wisely. You should invest the right amount of it in those areas where it’s most needed, and have sufficient funds on hand to keep everything flowing. It goes against your interests to put a large chunk of your capital into a larger-than-you-need, state-of-the-art warehouse when you can’t afford to fill it with inventory, even if you are doing that with future expansion in mind.
While an expert will be able to do a thorough analysis of your use of capital and highlight those areas where you may be investing too much or not enough, it’s important to keep in mind that an imbalance will create bottlenecks. Not being able to afford an extra truck when orders spike, for instance, will result in your deliveries slowing down in a major way.
Here we’re talking about working out precisely what each employee, department, and division is responsible for and letting them know that. For example, if a production department goes directly to a supplier for new stock when they’re running low, bypassing the purchasing department, there could be confusion about who’s responsible for reordering next time. The result could be a stockout that might shut the whole operation down. To avoid a scenario like that, exact planning has to be in place, meaning that everyone has to be clear on their specific area of responsibility, and everyone in the company has to be aware of it.
If there’s any kind of confusion in your company about who’s responsible for what, automation could be a big help. An inventory management system (IMS) gives a clear picture of your entire operation, and that’s information you can use to set up those planning guidelines. Once they’re in place, your operation will run seamlessly, eliminating any bottlenecks you had before in that area.
Miscommunication can lead to all sorts of problems, each of which could be a potential bottleneck. To avoid this, the right information has to be given to the right person at the right time. It’s no good giving your supplier an order if you haven’t listed all the details they need or let them know exactly where they’re supposed to deliver the items to; and you’re not going to get the results you want if one of your departments doesn’t let every other one know when they have a problem that will affect the entire supply chain. Good communication is key to everything.
To ensure good communication, everyone has to know who they report to and when to report to them, and they should be responsible enough to pass on the correct information in an easily digestible way.
While most manufacturing and sales companies are automated now, some try to save money by sticking to old technology thinking that it’s good enough and works for them. But that’s probably not the case.
An older automated system might not integrate all departments, and it probably won’t be able to “speak” to systems used by outside suppliers and contractors. These capabilities are found in newer systems, and they are a great boon to a company’s operation because they help speed everything up and create smooth processes. When you have that, you’ve gone a long way to eliminating supply chain bottlenecks, especially those that are unique to your company.
If you’re in the market to upgrade your software, check to see that it’s compatible with your existing in-house applications; it’s also a good idea to verify that the system will communicate with the software used by the outside contractors you deal with.
Steps to identify and prevent bottlenecks
In addition to the overarching areas that can cause the bottlenecks listed above, there are blockages that are unique to every company. While it’s up to each of these companies to identify their individual holdups and rectify them, there are some preventative steps all managers can take:
Find out where bottlenecks are occurring.
It can be difficult to locate exactly where the bottlenecks are in a large, complex operation. Examining your supply chain from different perspectives in detail may give you answers, though if you’re going to do something as complicated as that it would be easier and quicker to have an expert take a look.
A better idea is to use your supply chain management system, which can highlight those areas that are not working as efficiently as they should – those bottlenecks. If you haven’t already automated your supply chain management, you should seriously consider doing so.
Carry out data analysis.
Your data can be a good friend when identifying and overcoming bottlenecks. While any automated system you use will produce a lot of data, you can sort the data to get pertinent information about what’s happening at every part of your supply chain.
A reliable software like Cin7 Omni, will give you data that can point out trends, which is another way of uncovering bottlenecks. You can discover these trends by comparing data produced over a period of time. For instance, your data may show that a supplier is taking longer and longer to ship your orders, something that may not be a problem right away, but which could be later on. With that information, you can address it.
Map out a detailed plan.
When the company doesn’t have a detailed plan, it is often observed that all the departments follow their own agenda rather than working collectively towards a common goal. This kind of erratic behavior will lead to several bottlenecks in the supply chain. The management must consider all the options before setting out a plan. This plan should be based on historical data and future predictions. Every department should follow this plan to achieve maximum success.
Moreover, the company management must analyze and revise the plan when the circumstances change. Continuously updating the plan can prevent bottlenecks in the process.
Automate the supply chain procedures.
Automating the supply chain procedures can help eliminate the bottlenecks arising from manual management. Cin7 Omni inventory management software can not only help you to manage your inventory but also to regularize the supply chain bottlenecks. In addition, it can also seamlessly integrate with supply chain planning software like StockTrim, Streamline, Health Check, and Toolio, among others.
In a nutshell
Bottlenecks slow down the supply chain and affect your bottom line, so it’s important to find them and put an end to them, or at least mitigate their effects. The best way to do that is by conducting regular analysis of your processes and operations, and the simplest way of doing that is with an automated system like inventory management. More than just being the most reliable way to identify and prevent bottlenecks, automation is a great way to improve your company’s operation all round.
To learn more about Cin7 Omni’s inventory management system and how you can use it to prevent bottlenecks in your supply chain, click on the link to request a demo.
How to manage inventory for planned and unplanned plant shutdowns
Although not very often, factory shutdowns happen. Whether planned or unplanned, shutdowns cause major disruptions and financial losses, and therefore, you must understand how to deal with them.
Planned plant closures are usually for maintenance purposes. Essential to keep machinery and equipment in good working order, they usually happen once or twice a year. During these inspections, repairs may be made, worn-out parts may be replaced, and upgrades or new machinery may be introduced.
Unplanned plant closures usually result from sudden power outages and machines breaking down. An unannounced strike is another reason. A drop in demand can also be a cause. And in a worst-case scenario, a production line will close down when the facility runs out of raw material — more on that later.
Knowing that a plant will shut down at some point means you can plan for the event, and with pre planning in place, negative impacts can be mitigated. The best pre planning involves inventory control, and that’s what we’re going to examine here.
Managing inventory to prevent or mitigate a shutdown
Here are things you can do:
Limit inventory before a planned shutdown
When you know you’re going to have to shut your operations down, either for scheduled maintenance, upgrades, or audits, you can ease the pain by reducing the level of stock you’re holding beforehand. Keeping inventory has its own costs: A workforce has to maintain it, and capital is tied up in it. So if you make sure you only have the least amount you can get away with, literally only what you need to restart, you’ll cut down on expenses and mitigate the losses the shutdown creates.
Prepare for unplanned shutdowns by limiting inventory
A good way of mitigating the effects of an unplanned closure is to have a lean inventory management system in place. As the name implies, this system is all about getting rid of waste, unneeded excess. For inventory specifically, it’s about having only as much as is needed at any given time. The system operates on the “pull” system where inventory is “pulled in” when needed, as opposed to the “push” system that always has more stock than is needed and “pushes” it out.
Introduced by Toyota in its manufacturing unit in 1950, and later explored in the book Lean Thinking: Banish Waste and Create Wealth in Your Corporation by James Womack and Daniel Jones, lean inventory management keeps stock at minimal levels, so if an unplanned shutdown happens, the company is prepared and losses can be controlled.
Lean inventory management puts stock into three categories, A, B, and C, each one based on the items’ cumulative annual consumption value. The annual consumption value is arrived at by multiplying the number of units sold in a specified time, say a year, by the cost per unit. When that’s been worked out, a company will know exactly which items have the most value for them and can organize their storage and oversight appropriately.
- Category A: Pricier items. Though typically making up only 20% of a company’s stock, these more expensive items usually account for 70% of items used when the annual consumption value is applied.
- Category B: Less pricey, the items here usually account for 25% of the total annual consumption value.
- Category C: These least pricey items account for 5% of the annual consumption value.
Inventory management software like Cin7 can easily work out annual consumption values and do the categorization for you.
Prevent shutdowns caused by stockouts
It’s possible for raw materials to run out and cause a shutdown. Maybe an error was made in counting the number in storage; maybe a supplier didn’t deliver; maybe there was an issue with the supply chain. Whatever the reason, you can make sure you’ll be able to cover for these situations by having buffer stock. Buffer stock is a little bit extra for emergencies. The amount of buffer stock a company holds has to be carefully weighed. Too much and it’ll be a drag on company outlay; too little and it might not be enough to cover your needs. An inventory management system like Cin7 can solve this conundrum.
Reasons for shutdowns, and best ways to plan your inventory levels
Shutdowns are caused by specific events, and in order to plan your inventory levels, you have to have a good idea which ones are more likely to happen to you. Consider the following scenarios:
- External factors: If a shutdown is likely to happen because of bad weather, a natural disaster, government regulations, or a strike, you should have buffer stock on hand.
- Internal factors: Here we’re talking about a power outage or machines breaking down. For machine breakdowns, spare parts should be readily available at all times. For inventory, there has to be enough available to restart production.
Cin7 can analyze your data quickly and help identify which inventory control method is best for you.
The final analysis
Factory shutdowns, whether planned or unplanned, cause unwanted stoppages that will affect the bottom line. When it comes to inventory, there are ways to mitigate these losses and help you ride the closures out.
Cin7 is a good way to help you figure out the best way to manage your inventory. To find out more, click here to schedule a live demo with one of our experts.
7 tips for warehouse safety
Warehouses can be hazardous. First, the items they hold are stacked high and close together to make the best use of space. Second, a lot of pickers and machinery are going back and forth between the aisles and up and down the storage bins all the time. If the items haven’t been stored properly, if a worker is careless, or if a machine malfunctions, an accident can happen.
To prevent this, there should be strong safety measures and procedures that everyone should follow, and they should be enforced. We’ve honed them down and categorized them into seven main areas.
7 measures to take to ensure safety in warehouses
#1 Keep all spaces clean and tidy.
Dirt, grease, or messes of any kind can be a hazard. Workers could slip on them, and machines could stumble. At the very least, if these obstacles don’t cause a bad accident, they could severely affect workflow in the warehouse.
It’s important, then, for floors and work areas to be kept as clean as possible, which means not just sweeping, but washing them frequently. Any spills should be swept or wiped up immediately; and if any of that spillage could be from harsh chemicals that are being stored, having a special spill kit that can deal with it on hand is imperative.
Hygiene is also a factor to take into account, especially when Covid is still around. Have hand sanitizer prominently placed in several areas, keep all equipment clean, and request that your employees stay home if they feel ill.
#2 Provide regular safety training.
While safety training for new employees happens frequently, it’s just as important for existing staff to review safety precautions regularly. Safety training should cover everything from ensuring work spaces and equipment are kept safe to instructions on actions to take when anything goes wrong or an unforeseen emergency happens. Providing training every three or four months is ideal. It’s also a good idea to distribute a safety manual to your workforce.
In addition to making everyone aware of safety in the warehouse, all employees should know what to do in an emergency like a fire or an earthquake. Training and drills should take place on a regular basis. It’s also important to have exit routes clearly marked and accessible at all times and to have enough of them in the building for the size of the space.
#3 Put up clear signage.
Signs that warn about potential hazards are essential. These signs should let employees know where dangerous or inflammable materials are stored, if heavy equipment is nearby, or even which items in storage are heavy. When it comes to the building itself, letting everyone know about design elements that could trip them up, like steps at the end of an aisle, is a good idea.
Since warehouses are more often than not huge spaces in which one section looks the same as another, finding your way can be a challenge in an emergency. To overcome this, there should be large signs with bold lettering that point to emergency exits.
#4 Have the right safety equipment.
Proper safety gear, like lifting belts, should be provided to ensure your employees’ well-being. Depending on the type of material your workforce has to handle or the conditions they’re working in, other forms of safety equipment, such as respirators or hearing protection, might be needed. Utility knives with protective sheathing and walkie talkies also come under this category, the latter being especially needed in ultra large warehouses.
On a wider level, fire and smoke alarms should be adequately placed, along with fire extinguishers. If your company handles hazardous materials, your fire extinguishers should be the right ones for whatever the materials are. And, of course, first aid kits should be available in easy-to-locate areas.
All safety equipment should be checked regularly.
#5 Give out protective clothing.
Here we include safety goggles, safety vests, safety gloves, hard hats and even steel-toe boots. Protective clothing should be a good fit for the individual worker. Loose clothing could get caught in machinery, and a badly fitting hard hat is no use to anyone.
#6 Ensure heavy equipment is used correctly.
Forklifts and pallet jacks could cause serious injury if not handled correctly or if someone gets in their way. Make sure heavy equipment is only operated by properly trained personnel, and that the equipment has its own pathways in the warehouse. Equipment should be restricted by a speed limit that is enforced.
#7 Store items properly.
Warehouses store items on high shelving where they are packed tightly together. To prevent anything from falling and causing injuries, everything should be placed with care, one thing stacked straight on top of another, and heavier pieces should be stored on lower shelves.
Make the most of your warehouse with Cin7
When you put recommended safety measures in place, you’re less likely to have downtime caused by injuries. Plus, your workforce will feel much safer.
To optimize warehouse operations even more, there are warehouse management systems (WMS) like Cin7. This software helps organize your warehouse, which helps you maintain a safe working environment.
To find out more about Cin7’s WMS and how it can make your life as a warehouse manager easier, book a free consultation with one of our experts.
The strategic importance of order processing in supply chain management
For an online sales business or a manufacturing company, it’s all about the supply chain. It covers everything from the procurement of items for sale, or raw materials for the production process, to delivery of the items or products. Controlling the supply chain and keeping oversight on it is, as would be expected, supply chain management (SCM). Order processing is the central pillar of SCM; in a way, it’s the heart of the whole fulfillment process.
In this blog, we’re going to take a close look at how order processing works, and explore its importance to supply chain management.
What is order processing?
Order processing goes into effect the minute customers select and pay for goods online and continues until those goods are received. Broad in scope, it follows defined steps to get to that end point.
Here’s how the process breaks down:
Step 1: Orders are received
As soon as customers have filled their online carts and paid for their goods, their orders are transmitted to the warehouse or fulfillment center. Here they’re broken down into their component parts, which means product, quantity, size/color (if relevant), etc.
If the sales or fulfillment company is large enough, these order details are processed by an automated inventory management system (IMS). This sophisticated software will know if customers’ goods are in stock, and if so where they are. In essence, the system is able to determine the best warehouse to route the order to; and if some items aren’t available right away, it will give instructions to send them as, and when, they are. In addition, if a customer has put in more than one order, the IMS can consolidate them into one package.
Step 2: Items are picked
Picking describes the actual job of collecting items for an order from their storage spaces. Pickers do the job. Warehouses can be large—some are gargantuan—so getting organization into this process can be complicated. Picking can either be done on an individual-order basis, by warehouse zone, or in bulk – which means picking for several orders at the same time.
Irrespective of the method used, the whole process starts with a picking list that itemizes everything according to its storage location and sets out a route round the warehouse for the pickers to take. The aim, of course, is to cut down the picking time.
Step 3: Orders are sorted out
After picking, items are taken to a sorting area. If they were picked in bulk or by warehouse zone, this is the area where they’ll be sorted into their individual orders. This is also the time when items are checked against the original orders to make sure everything is there, is in good order, and of high quality.
Step 4: Order are packed up
Making sure the appropriate packaging is used is trickier than might be thought. The box itself should be the right size for the items and strong enough to hold them during shipping, and the padding inside should be enough to protect the contents, but light enough to keep transportation costs down. Sometimes this padding has to be specialized. If food is being packed, for instance, it might have to be kept cool with gel packs or dry ice.
After being packed up, shipping labels are attached.
Step 5: Orders are shipped
We’re now near the end of order processing. After boxing and labeling, shipments are organized by geographical location and assigned to their respective delivery trucks. Size and weight might also be a consideration when selecting transport: extra heavy items, or those that need refrigeration, will need specialized trucks. At this stage, the type of delivery a customer paid for also has to be taken into consideration. Expedited delivery, for example, will be given priority. The point is that it’s important to deliver an item at the time the customer expects it.
Step 6: Orders are delivered
Order delivery is the last step of the order processing system. The customer can choose a particular time to have their order delivered, or they can leave special instructions, like having the package be left with a neighbor. If a customer has opted for Cash on Delivery (COD), the delivery drive will be the one who collects the payment.
The importance of order processing in supply chain management
Order processing is the core, the beating heart at the center of the supply chain system that everything else more or less has to service. In essence, for any sales, fulfillment, or manufacturing entity, processing orders – getting them together and getting them to the right customer in time – is what they’re about. It’s true that without proper management in any area of the supply chain businesses won’t perform at their best, but when it comes to order processing, its efficiency, speed, accuracy, and cost-effectiveness are actually the determining factors of success and, ultimately, profit.
Whatever way you look at it, though, supply chain management is a complex operation. That’s why it’s a good idea to automate it.
The upsides of automation are:
- maximized profits,
- minimized costs,
- improved customer satisfaction,
- increased market share,
- reduced workload for employees, and
- an overall boost to the company’s brand and reputation.
Final thoughts on order processing and its importance to the system as a whole
Having looked closely at the complete supply chain, we can see that everything centers on the order processing part. Putting orders together and getting them to customers is, in effect, the commercial activity that reasons for the company’s existence.
Automating all or some of the areas of supply chain management with an inventory management system can be of great benefit to a company, both logistically and financially. Cin7 is one of the best.
To learn more about how Cin7 can help your business, you can book a demo from one of our experts by clicking here.
Small Business Inventory Management Software
Why your business should use supply chain visibility
All businesses need a strong supply chain to ensure the goods they want to sell are delivered on time, in perfect condition, and at a competitive price. Yet, the supply chain is a complicated system with many players, each with its own goals and strategies. Every step in the production process — from sourcing materials to shipping products to customers — is handled by a dedicated group of people or systems.
Having a well-functioning supply chain can save you time and money. For example, if you have trouble finding a specific product type, you can use your network of suppliers of your other products to help find it. In many ways, your supply chain is critical to the success of your business.
In recent years, there’s been a revolution in how businesses use the supply chain. As the way we buy things changes, the supply chain has undergone a transformation, changing how companies operate in many ways. One essential part of this transformation is the use of technology. Today’s businesses rely on digital tools to manage their supply chains more effectively than ever. This includes electronic data interchange (EDI), which allows companies to send and receive information.
What is supply chain visibility?
Supply chain visibility is the ability to see everything that happens in the supply chain. This includes tracking the progress of products from their origin all the way to your customer. It allows you to make sure that products are delivered on time and in accordance with your specifications. You can also track inventory levels and forecast future needs.
When a supply chain is visible, you track the flow of products and materials to ensure they are delivered on time, in the correct quantity, and at the correct cost. This helps you identify and fix problems early, preventing the development of larger issues that could disrupt your operations. Many different tools can be used to track your supply chain, including internal systems, cloud-based ERP systems, and third-party suppliers.
The increasing complexity of strategic supply chains & role of technology in managing them
One of the most critical aspects of the supply chain transformation is the increasing complexity of strategic supply chains. A strategic supply chain is essential to your overall success, and it involves multiple steps and connections between different companies. The more complex the supply chain, the more difficult it is to manage.
One way that technology has helped to manage this complexity is by making it easier to track products throughout the supply chain. This tracking can be done with electronic data capture (EDC) systems or radio frequency identification (RFID) tags. EDC systems allow you to track products as they move through the manufacturing process, and RFID tags allow you to track products as they move through the distribution process. These systems allow you to detect problems early in the process and fix them before they become significant.
Another way that technology has helped to manage the complexity of supply chains is by making life easier for purchasing and planning departments. Purchasing departments now have access to more information about their suppliers, including information about the products those suppliers are manufacturing. This allows purchasing departments to be more efficient in selecting the best suppliers and helps them stay competitive in their industry. It also helps companies ensure that their supply chain remains stable and reliable.
Another benefit of technology is that it allows you to expand your sales worldwide and across different regions of the country. For example, you might have factories in several other countries or need goods produced and shipped directly to stores in another region. With modern technology, this kind of operation can take place with ease, as each factory in the supply chain can use technology to get information on how to produce, package, and ship all of the goods they’ve been tasked with supplying.
How does technology help make a supply chain visible?
Technology has helped in increasing supply chain visibility. One of the most important ways technology has done this is by creating a digital trail. This trail records all the actions that have been taken along the supply chain, from the sourcing of materials to the delivery of goods to the customer. This information can be used to track down any issues that may have occurred and to make adjustments as needed. It can also help companies to improve their communication with their suppliers. Two technological advancements in the supply chain are the use of big data and Internet of Things (IoT) technology.
Improve analytics with big data
With automation of the supply chain, more data are available for statistical analysis. This can lead to better decision-making at every stage of the supply chain. For example, in your warehouse, picking zones and warehouse space allocation can be determined by analyzing data on the most popular products and efficiency of workers. Similarly, production scheduling and transportation processes may be improved by analyzing such facts as cost, inventories, capacities and consumer patterns.
See more with Internet of Things technology
Although not widely used in the supply chain yet, IoT technology has huge potential. IoT refers to objects that are connected to one another or to a central sensor and communicate with one another. For instance, sensors may be placed on freight containers that report their location and condition to a central source. By tracking devices and data in real time, you can take corrective actions, such as replacing a shipment of food that has been exposed to unsafe temperatures. You can also collect data that over time can reveal patterns, such as where you consistently have bottlenecks in your distribution, that can be used for predictive analysis and preventative measures.
How does supply chain visibility enable better inventory management?
By digitizing and automating various aspects of your supply chain, you can improve your inventory management.
Improve inventory management
Inventory management is an important part of any business. It’s essential to be able to track inventory so that you can make sure that you’re always getting the supplies that you need and minimizing the amount of inventory that you have on hand. By having high supply chain visibility, you can ensure that all the different parts of your business are working together as a cohesive unit. This will lead to increased efficiency and reduced costs overall.
Maintain healthy inventory levels
Maintaining healthy levels of inventory allows businesses to avoid excess stock that can lead to increased costs and reduced profits. By automating your inventory, you’ll be able to submit orders for high volume products and make decisions about poorly performing products more quickly, allowing you to maintain healthy inventory levels. This will help to ensure that the inventory remains in good condition and does not exceed the company’s needs.
Boost demand forecasting
By using big data analytics to understand which of your products sell well at certain times of year, you can better predict demand, plan for shortages and manage your inventory effectively.
How can Cin7 improve your inventory and supply chain visibility
There are many possible reasons brands lose track of their stock. Generally speaking, though, a lack of visibility tends to come down to inadequate inventory management. If your inventory management system doesn’t automatically include purchases, sales, and other activity that impacts the big picture or if it doesn’t track information in real-time, the information you have about your inventory is not complete nor up-to-date. Here are two common examples:
1. Using manually updated spreadsheets
This is one of the biggest reasons for lack of visibility. Small companies that sell few products can manage fine with spreadsheets. With even a little growth, however, spreadsheets can get out of date quickly, giving you a lack of visibility of what’s in your inventory. Reported stock levels will not match reality, and you may not realize it’s time to restock.
2. Managing sales channels and inventory separately
When you use separate systems for sales channels and inventory, you risk overselling your inventory. For example, if you are a company with a Shopify store and you add Amazon Seller to your channel mix, you will now have at least two places to track inventory, plus any spreadsheets or siloed inventory software you may use as a “master.” The information in your master inventory depends on the people who collect and update the information. If the information is even a little off, the company could end up selling customers a product that isn’t available.
Inventory visibility cannot be an estimate of the products you think you have. It must be the actual inventory based on current sales and any other activity that impacts accurate stock levels and locations, such as purchases, which increase inventory, and branch transfers, which move products to different locations.
How to achieve inventory visibility
Proper stock visibility requires accurately recording everything that happens to products in your inventory. This includes purchases, sales, stock transfers, returns, and any workflow that changes inventory quantity, location, or cost. To that end, visibility can only be achieved if all data are integrated with and tracked in a central inventory master, including:
- All purchases that increase your inventory of components and finished goods,
- Production jobs that lower component inventory and increase finished goods inventory,
- Sales orders that reduce your inventory,
- Dispatched orders that reduce stock on hand and change order status,
- Purchases and sales that adjust inventory at each stock location,
- Stocktakes that confirm or adjust inventory at each stock location, and
- Stock transfers that decrease inventory in one location and increase inventory in another.
The key to visibility is to integrate your data so that you can track products in real-time as they move through your supply chain, affecting stock levels and inventory value along the way.
The benefits of inventory visibility
Integrating data allows your company to
- Reduce data entry and eliminate related errors.
- Eliminate the use of redundant software and portals.
- Increase order accuracy.
- Maintain optimal inventory levels / reduce overall storage costs.
- Fulfill orders faster and increase order transparency.
- Build customer satisfaction and drive future purchases.
- Increase forecast accuracy for improved inventory planning.
- Reduce losses due to obsolete inventory.
Achieving inventory visibility is simple with Cin7
By providing real-time visibility into the status of shipments, Cin7 helps companies to identify potential issues in a timely manner and take corrective action. By using Cin7, businesses can confidently rely on the software to help them make informed decisions about their business operations. Book a free, no-obligation demo below to learn more about how Cin7 gives product companies complete, real-time inventory visibility. Request a Demo.
5 elements of an optimized inventory management system
Retail businesses have an average of 20% inventory to sales ratio. This I/S ratio compares the value of your inventory with the amount you make from selling your goods. The I/S ratio is arrived at by dividing the revenue made from overall sales by the value of the stock that’s kept. So, with a 20% I/S ratio, if you make $100 from selling your items, your stock would be valued at $20. More simply, the I/S ratio here would be five (revenue made from sales divided by value of stock). Maintaining the I/S ratio that’s best for your business is key to maximizing profit. If there’s too much stock, profits are compromised; if there’s too little stock, orders might not be filled. Optimization is the key. What are the best ways to optimize inventory? And, what are the five elements of an optimized inventory management system? Let’s find out.
If you are a businessperson, deciding the amount of inventory you should keep on hand is crucial. If your stock runs out, or if you have too much of it, the consequences could be serious. There could be financial losses and your reputation could be damaged. The only way to avoid this is by having optimum inventory on hand, or the right amount you need. This article will help you to understand what inventory optimization is and explain the five elements of an optimized inventory management system.
What is inventory optimization?
Inventory optimization means maintaining an optimum amount of stock, stock being defined as all the stock-keeping units (SKUs) that are being held by a business. When a company has an optimum level of stock, its working capital is being used to its best advantage.
Overstocking inventory can result in
- Working capital being tied up in unneeded stock.
- Stock going out of fashion and becoming unsellable.
- Workers spending time and energy unnecessarily.
- An elevated risk of loss of goods to theft or accidents.
- Valuable storage space being used unnecessarily.
On the other hand, understocking and stockouts can result in
- Turnover being halted.
- Company reputation being damaged.
- Production lines being broken.
- Workers’ time being lost.
Inventory optimization can eliminate these losses. Put another way, when optimal levels of inventory are maintained, resources, like physical space, labor, and capital, can be used in their most efficient ways.
5 elements of an optimized inventory management system
As we saw earlier, it is crucial to optimize the amount of inventory you keep at all times. But in order to do this right, what should you be focusing on? Let’s look at the key areas in detail.
Graded policies for inventory management
First, your stock policies should be clearly defined, and you should let the relevant people know about them well in advance. It isn’t helpful if the purchasing department is kept in the dark about these policies.
The inventory turnover ratio indicates the liquidity of the inventory, or the number of times the average inventory is sold during the year. It shows the efficiency and effectiveness of the company in investing its funds.
Inventory turnover time is the number of times a company replenishes its stock in a given period, generally a year. In other words, if you sell stainless steel spoons, the inventory turnover of finished product — spoons — is the number of times you sell out of spoons and replace them. The following formula shows how to calculate the inventory turnover ratio:
|Inventory turnover ratio =||Cost of goods sold|
|Average value of inventory|
|Average inventory =||Opening inventory + closing inventory|
Cost of goods sold = Opening inventory + purchase – closing inventory
Now you know how many times a year you have to refill your inventory. The following categories of inventory are dependent on this ratio.
- Fast moving – Fast-moving inventory is that which is used or sold in a short or easily known period of time. This period is different for every industry. The inventory turnover ratio will be higher for goods in this category.
- Slow moving – Slow-moving goods are those that stay in your warehouse for a more extended period of time. The inventory turnover ratio for these types of goods will be lower.
- Non-moving – Non-moving or obsolete goods are those stored in your warehouse for a long time because there is no market for them. This inventory is also known as dead stock.
These three categories should be a major consideration when making purchases. Separate your stock into each one, and invest more in goods that are fast moving than those that are slow-moving.
Realistic demand forecasting
Forecasting demand is, perhaps, the first step when it comes to good inventory management. Forecasting demand accurately is not an easy task, however. There are many aspects that have to be considered: historical sales data, customer biases, future demand, and growth. Additionally, it is crucial to take technological advances and trends into account.
How can you predict demand for your products accurately? Well, quality software can help. Cin7’s system generates reliable demand forecasting reports. Cin 7’s forecasting demand report can make your job a lot easier.
Determining product life cycle
The term product life cycle is defined as the period between the product’s initial production to the time it is no longer sold. If you launch a new product, sooner or later it will stop trending and your customers will move on to something else. There are five stages to a product’s life cycle that impact your inventory management:
- Introduction – There is less awareness at this stage, so the demand is less, and there is no need to stock a lot of products.
- Growth – Awareness of the product is on the rise, and the company should be prepared to fill more orders.
- Maturity – This is when demand reaches a plateau. Demand will still be high, so the company won’t have to make changes to the level of stock it maintains.
- Decline – Here, the company realizes that demand is dropping. Customers have had enough of the product and are buying less of it. When this point is reached, the company needs to reduce production and focus on replacing it with something new. This is also the time to push more of the product by offering discounts and rewards.
- Obsolete – Now the product is totally out of demand. Any remaining inventory you have becomes dead stock.
The life cycle of a product can be short (a few months) or long (spread over years). These life cycles have to be taken into account when forecasting demand for your product. Doing this accurately will prevent overstocking or understocking,
Your purchase department should have clear restocking instructions. Every item in the inventory should have a specific reorder point (ROP), a predetermined level of goods at which they have to be restocked. When determining this reorder point, you should consider:
- Safety level for stock: This is the minimum amount you will need on hand to tide you over until your new order arrives. You don’t want to run out of stock.
- Logistics: You have to consider the time it takes to get your goods to your factory or warehouse.
- External factors: These include weather, political upheavals, and labor issues. Any one of them can affect your delivery time.
- Supplier lead time: This is the time it takes your supplier to dispatch your products. Suppliers have different lead times.
Management needs to be aware of ROP to ensure stock is replaced in a timely manner. Inventory management software like Cin7 can send alerts that let you know when you reach this ROP.
Investing in reliable inventory management software
If you find inventory management challenging and are intimidated by the sheer number of calculations that have to be made, here’s an easy solution: Cin7. This versatile and easy-to-use software can help you manage your inventory easily. Among the features it has to make your life easier are
- Determining reorder levels,
- Alerting you when you reach ROP,
- Sorting third-party logistics (3PL),
- Helping you with B2B ecommerce,
- Generating reports on COGS, forecasting, cashflows, and inventory on hand, and
- Integrating with other software and mobile OS.
The following video shows how Cin7 inventory management software can help you take your business to the next level:
One of the significant advantages of Cin7 is its inventory management app. This app lets you connect to your inventory management program from anywhere.
Final take on inventory optimization
While inventory optimization is a crucial element of a successful business, it is also painstakingly tricky and complex. Overstocking can lead to losses, while understocking can damage your reputation. How can you overcome these dilemmas? Cin7 inventory management software turns the whole ordeal into a piece of cake.
Why wait? Contact our experts for a demo, and unlock the true potential of your inventory.
How to execute a year-end inventory count
Whether you’re running an auto body shop, a law firm, or a retail store, doing a year-end inventory count helps your business close the books on the past 12 months and organize yourself for the year ahead. In fact, the year-end inventory count is necessary for successful inventory management throughout the year. It allows you to clean up records and gives your business verified data to analyze.
Since retailers have a lot of inventory to manage, counting inventory correctly is crucial and allows you to make informed buying decisions later. Learn how to execute a year-end inventory count and how your annual count can help forecast demand for the year ahead in this article.
What is a year-end inventory count?
A year-end inventory count is a physical count of all the inventory on hand at the end of the year. The count is performed to verify that the physical inventory matches the numbers in your inventory management system.
A year-end inventory count is different from an inventory cycle count, which audits a smaller portion of inventory. While a cycle count allows you to monitor your inventory by sampling your inventory throughout the year, a year-end inventory is a physical count of everything you have on hand at one given point in time.
How do you conduct a year-end inventory count?
These are the steps that you need to follow for inventory counting:
- First and foremost, you need to plan the day for conducting inventory count. It’s crucial to pause your warehousing operations while you do perform the counting so that you get an accurate snapshot of your inventory. You should plan a day that causes minimal impact on pausing the operations.
- Once you finalize the date, you should form the team who will perform the stock counting. It is important to train them about your counting process and acquaint them with the warehouse’s premises. Dry runs can be organized a few days before the actual counting day.
- You should also prepare your warehouse for the stock counting process. It should be thoroughly cleaned, and steps should be taken to ensure that there’s no scattered inventory. If there are boxes lying around the warehouse, it will slow down the workers who are counting.
- The warehouse should be organized, and the areas (count zones) should be divided amongst the counting team so that everyone knows their responsibilities.
- It’s crucial to equip your team with the right tools for counting. For manual counting, you can use counting tags. If you are using tags, then it’s best to let your team work in pairs so that one person can count the inventory while the other can note the values in the counting tag and stick it near the inventory. It’s best to get the counting tags signed by the respective team as it gives you clarity about the person associated with counting for a specific section.
- To cross-check the accuracy of the counting, you can personally examine the areas to cross-verify the values mentioned in the counting tags. Otherwise, you can allocate members from other teams to cross-check the tag values. Cross-checking is crucial to get an accurate representation of your inventory. In case your inventory is also stored at other locations, you should coordinate to get the accurate values from those locations as well.
- Performing inventory counts using manual sheets and counting tags can be time-consuming and prone to human errors. Using an inventory management software like Cin7 can be of great help. Instead of using tags and sheets, you can use barcode scanners to scan the inventories on the shelves. The software reconciles the inventory values with the ones already present in the system. This way, you can easily gauge the discrepancies in the inventory that’s physically present with you.
Why do year-end inventory count?
The year-end inventory count is essential because it ensures the stock you have on your shelves matches your records. By getting an exact look at your inventory, you can comply with tax requirements, manage corporate audits, and offer accurate data to your accounting team.
Once you complete your inventory count, you’ll have the data you need to complete an annual financial analysis. You also get the data you need to detect inventory shrinkage and forecast how much inventory you’ll need in the year ahead. On top of that, you get the chance to get inventory organized for the new year.
Knowing your year-end inventory allows you to
- Get a better understanding of what products you have.
- Hold accurate inventory records for accounting purposes.
- Gain insight into products that don’t sell well that you shouldn’t order in the future.
- Understand which products require a new selling strategy.
- Know the demand and profitability for expansion consideration.
- Consider adjusting periodic automatic replenishment (PAR) levels for top-selling products.
- Determine the cost of goods sold and total net income.
- Make business decisions based on data instead of intuition.
- Analyze pricing strategy and identify room for improvement.
Does your business have inventory shrinkage?
Inventory shrinkage occurs when there’s less physical inventory than what’s listed in your inventory records. Shrinkage occurs due to human error, damaged stock, vendor shortages, lost inventory, or stolen inventory. It can drastically affect profits and is a problem that always needs to be investigated further. Businesses usually uncover inventory shrinkage as they do their year-end inventory counts.
How to handle inventory shrinkage
If you uncover inventory shrinkage during your year-end inventory count, your team should look for more information about what happened. If you are using inventory management software, you can examine past inventory records to determine if there are any trends that need investigation. Significant, widespread shrinkage can indicate theft or fraud, while one-off mistakes tend to reveal clerical errors. Damaged goods are self-explanatory.
Once you uncover and investigate the cause of inventory shrinkage, you can put guardrails on processes to prevent further loss. Some common preventive measures include:
- Tightening security where inventory is stored.
- Installing cameras or locking up high-value items.
- Training employees about proper inventory counting.
- Allowing only trained employees to accept and inspect new inventory.
- Reviewing daily transactions on inventory apps.
- Verifying purchase orders, invoices, and delivery slips when new inventory arrives.
- Checking inventory shrinkage via cycle counts.
Discovering inventory shrinkage isn’t fun — but it’s a wake-up call for many businesses.
What if you have too much inventory?
Once you complete your year-end inventory, you might realize that you have more physical inventory than expected. If you have a lot more inventory than you need or want, you may have to figure out how to deal with the surplus. The first step is to determine if the excess inventory is still good to sell. Then you can adjust plans, orders, and budgets accordingly.
Once you figure out what your business needs for the year ahead, it’s time to get creative. What kind of promotions or sales can you have? What items should be sold at a discount? There may also be items in your inventory that can be repurposed or donated. If you donate excess inventory, talk to your accountant about writing them off for tax purposes.
Finally, you should talk with a liquidator about buying excess inventory. It may not be very profitable, but you can cut losses, clear up space, and move on.
Using year-end inventory to predict next year’s demand
One of the best reasons for conducting year-end inventory counts is to understand how your business used (or didn’t use) items over the past 12 months. A detailed snapshot of available inventory helps your business forecast demand for the year ahead.
By reviewing what hasn’t sold, you can plan sales, promotions, and marketing campaigns. These strategies can help you move old inventory and lets you focus on restocking only what your customers want.
Cin7’s inventory management software simplifies inventory counts
Cin7 inventory management software allows your business to track inventory using modern technology and powerful automation features. Cin7 is the best choice for inventory management software because it helps save you time, money, and stress. When you switch to Cin7, you’ll be able to:
- Access your data at any time and place.
- Set it up quickly, easily, and to your liking.
- Use ready-to-scan barcodes with your phone’s camera.
- Customize and allow access to teams, vendors, and suppliers.
- Generate custom barcodes for unlabeled stock.
- Create data-rich, shareable reports to help you understand inventory.
- Get alerts when you’re running low on a product, if it’s expiring, or approaching warranty.
- Create product histories to answer who, what, and when details.
Ready to see how our inventory software makes your year-end inventory count easier? Book your Demo now.