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A company’s inventory is often its most valuable asset, but it’s also its greatest liability due to the ever-present threat of theft, damage, and spoilage. Proper inventory management, therefore, is essential for businesses of all sizes.
An inventory management workflow refers to the movement of inventory through the supply chain, as well as the systems and practices used to ensure products move smoothly and mistakes are kept to a minimum.
If you’re eager to learn more about the wholesale inventory management process, check out the following guide.
The inventory management process explained
Needless to say, it’s a complicated and multi-faceted process. But it’s essential, and proper inventory management workflow is at the heart of every successful wholesale business.
The steps of inventory management
How you choose to track and manage inventory will depend on your specific needs, and those needs are largely dependent on your industry.
A typical industry management process looks something like this:
- The goods are delivered: The raw materials/components or finished goods are delivered to your facility.
- A review is conducted: The goods are checked, sorted, organised, and stored.
- Inventory levels are checked and monitored: Inventory checks should be conducted regularly to minimise the risk of errors and oversights.
- Orders are placed: Customers place orders for the products.
- Orders are approved: The orders are passed to a supplier or through a point-of-sale(POS) system.
- Goods are taken from inventory stock: The goods are located (often via SKU numbers) and are sent to the customer.
- The inventory is updated: Sold goods are removed from the inventory.
- Restock: As soon as the stock levels dip below a certain amount, a new order is submitted and the whole process starts again.
Assessing your current system
As noted in our wholesale inventory management guide, proper inventory management begins with the right system.
If there are shortcomings during any stages of your current inventory management system workflow, your bottom line will suffer.
An inventory management system is simply a set of processes that covers areas such as documentation, inventory reports, inventory management software, and inventory management workflows.
Utilise an inventory management process map
The map should outline the ideal and preferred flow, as well as what you will do when stock is low and not available.
For instance, if the customer orders and you have the stock, the flow will depict the stock being picked, packed, and shipped. If not, you’ll need to determine if more stock can be ordered, if there is time to do so, and whether a refund should be initiated.
Applying your preferred inventory management method
There are several different inventory management methods. The one that works best for you will depend on your industry and product, but for optimal efficiency, you need to ensure that your inventory management workflow is compatible with your chosen method.
The most popular inventory management methods include:
- Just-In-Time Management (JIT): An inventory management method that aims to reduce costs by stocking only what is needed to produce/sell products. Production is also prepared to ensure that future deliveries will arrive “just in time” if there is a spike in demand.
- Economic Order Quantity (EOQ): Also known as optimal order quantity, this method uses a calculation to determine the ideal order quantity based on how quickly it sells and how much it costs to hold.
- Materials Requirement Planning (MRP): Calculates the materials and components needed to produce finished goods while ensuring these components are available when needed.
- Days Sales of Inventory (DSI): Also known as Days Inventory Outstanding (DIO) and Days in Inventory (DII), this method uses a financial ratio to determine how long the company holds onto inventory before selling it.
Continually improve your inventory management process
There are always ways to save time and money; always processes that can be streamlined and systems that can be tweaked. So, once you have determined the best methods for inventory management, think about ways that you can improve and optimise the process.
Here are a few tips:
- Emphasise priority products: It can be difficult to optimise all of your stock, so it’s best to start with the biggest sellers. Optimise the products that sell the most and build from there.
- Check the data and keep planning: Monitor the data, check the statistics, and look for weak points and areas where improvements can be made.
- Build a strong team: From the pickers and packers to your customer support team, every member of staff plays an important role in the overall health of your business. If there are weak points, fix them; if there are inexperienced or unskilled staff members, train them.
- Location, location, location: Is your warehouse in the best location? Is it affordable? Do you have easy access to customers and suppliers? The success of a business is often heavily reliant on its location, so make sure you’re where you need to be.
- Use the right tools: From cloud-based management software to telecommunications, RFID tags, and eCommerce payment solutions, make sure your inventory management solutions are backed by the right tools.
The benefits of effective inventory management
An effective inventory management system provides a number of benefits, including:
- Reduces storage and labour costs
- Streamlines the management and flow of inventory
- Decreases human error
- Reduces dead stock
- Encourages better relationships with supplies and customers
- Improves data transparency
- Allows for simpler maintenance
- Makes it easier to create and adjust order quantities
Get expert advice on implementing inventory management software
If you need a little guidance on utilising the right inventory management workflow for your business, contact us today. We have the experience, knowledge, and tools you need to take your wholesale business in the right direction.
Our wholesale inventory management software provides a one-stop shop for inventory management. It includes real-time SKU tracking and features such as advanced price lists and category/attribute options, all designed to improve monitoring, organisation, and tracking.
FAQs about inventory management workflow
Enterprise resource planning (ERP) is a system that incorporates all aspects of a business onto a single platform (including inventory management), allowing for easier management organisation, and optimisation.
Check our guide on ERP integration to learn more.
A covers high-value goods that are few in number; B goods are less expensive but greater in number; C goods have the lowest price and are available in the largest quantity.