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8 Efficient Inventory Management Strategies to Boost Sales for Startup Businesses

inventory management strategies

Do you know any startup that does not manage its inventory? Probably not.

That’s because robust inventory management is integral in protecting your business’s bottom line. It also allows you to provide the best customer service to your buyers.

Think of it this way: Someone decided to buy one of your products, only to find out it is no longer available. This can be a significant turn-off for your customers.

One of the reasons you are unaware of whether an item is still available is because you lack inventory management. And if left that way, you will be unable to control your operation costs and provide timely delivery to your customers.

To help you out, here are eight inventory management strategies that you can apply for your startup business:

Demand forecasting

Demand forecasting lets you know how much of each product you need to have to meet your customers’ demands. For established businesses, the basis of demand forecasting should be on historical sales data. As a  new business, one might need to rely on industry data until they have their own sales history.

For inventory planning, demand forecasting is crucial since it allows one to know the minimum amount of a product you should have on hand.

Then, you can reorder targets after you’ve reached that number. You can then revisit the demand forecast every quarter to adjust minimum quantities and reorder targets.

FIFO approach

FIFO (first-in, first-out) is a practical system for businesses that first sell the oldest items in their inventory. If the item arrived first in the warehouse, it should be the first to leave when customers order.

Doing so keeps your inventory fresh, which is essential, especially for perishable goods or has an expiry date.

The LIFO (last in, first out) approach, on the other hand, is the opposite of FIFO. This method sees that the most recently received items on the inventory will be the first ones out of order. LIFO is ideal for businesses not shipping perishable goods. That’s because this accounting method reports income that will have tax advantages.

Inventory turnover

To optimize your inventory, you should identify low-turning stocks using the inventory turnover. Doing so will inform you how often your inventory is sold out and replaced within a specific period. 

Although the optimal turnover may vary from one industry to another, it would be ideal to have a high inventory turnover ratio. This indicates that items are moved out quickly and do not spend a while on the shelves. 

ABC prioritization

The ABC inventory analysis refers to sorting out your inventory into three different categories. This will depend on how well they sell and how much they cost.

  1. A-items: These are best-selling items in your warehouse that don’t take up a lot of space or cost.
  2. B-items: Mid-range items that sell regularly. However, it cost more than A-items to store.
  3. C-items: Makes up the bulk of your inventory. It also contributes the least to your bottom line.

By doing an ABC analysis of your inventory, you can keep the working capital costs low. That way, you can identify which items you need to reorder more frequently and the things that don’t need to be stocked often. This also reduces the risk of having obsolete inventory.

Inventory audit

Doing an inventory audit is an essential part of the inventory management process. Usually, businesses will cross-check their financial records on their inventory records. 

An inventory audit ensures that all the records are accurate and find out if there are any discrepancies on the count or financial records. These audits also help you in inventory forecasting. 

By tracking how many specific items you have on hand, you can fine-tune your ordering process. By establishing a consistent and well-documented inventory audit cycle, you can reduce discrepancies in your stock availability. As such, you can ensure the success of your startup business.

ERP software

It’s pretty common for small businesses to start with spreadsheets when managing their inventory. But as you begin to expand, a simple inventory management software allows you to track and order items more effectively. 

This is where an Enterprise Resource Planning (ERP) software can be helpful. Having an ERP solution allows you to manage your supply chain and customer transactions in one place. It also allows you to integrate the following technologies:

  • Barcode scanning systems.
  • Advanced radio frequency systems
  • Automated Information Management System (IMS)

Having an automated stock management system allows you to be efficient in monitoring your inventory. This can lead to time-saving and cost-effective customer service. Moreover, it will enable you to cut costs and reduce errors in inventory management.

Quality control

Your business couldn’t survive without quality control. No matter your niche, you should always make sure that the products you’re using and the dishes your customers are eating aren’t spoiled or expired. 

It is advisable to never compromise on product quality. If you do, you might end up losing customers, putting your business in jeopardy, and potentially going out of business. 

Purchase orders

Small businesses buy inventory by contacting their supplier. And then, they will send the payment and wait for their merchandise to arrive.

However, you should keep an organized system if you want your business to thrive. This involves knowing when it is time to restock and order your inventory. That way, you can fulfill purchases with ease. 

This is where purchase orders can help. Purchase orders are documents that you send to your supplier or manufacturer. Its purpose is to confirm the specific number of goods and services that customers purchased from you. That way, suppliers can verify how many items you need while ensuring that you have enough stock. 

Over to You

Inventory management is crucial for startup success.

When you implement an effective inventory management system, you can cut costs and enhance the supply chain of your business. This also means reduced expenses on overstocks or wasted money because you cannot sell the items in your inventory.

And when you combine this with other sales success principles, your startup business will be up for success in no time. 

About the author

Robert is a freelance writer based in a NYC. When not writing for clients, he is busy consuming content on how to make home cleaning and organization easy and simple.