• Automated inventory management systems use barcodes, real-time updates, reorder points, and integrations to reduce human error and increase speed.
• The benefits of automated inventory tracking include improved workflow efficiency, fewer errors, and improved demand forecasting.
• Key features in automated inventory management software include barcodes, perpetual inventory tracking, integrations, reporting, and reorder point notifications.
• Implementation involves identifying business needs, setting up automation like barcodes and integrations, and calculating reorder points.
• Automation will save businesses money through reduced labor requirements, faster workflows, and minimized errors.

AI and automation seem to be all anyone talks about these days, and as it turns out, there’s a pretty good reason for that. It’s hard to ignore the value AI and automation bring. These key features can help businesses through process automation, predictive analysis, and automated inventory management.   

So, today, we’ll focus on automated inventory tracking, including its benefits and what to look for when implementing an automated inventory management system. 

What is an automated inventory management system? 

Inventory management, in theory, is pretty simple: track products and assets as they move through your business. In practice, though, it’s much more complex. You’ll need to juggle many moving pieces, like sales orders, purchase orders, stock levels, price, inventory movement across multiple locations and sublocations, and so on.

Manually tracking these things is possible but usually inadvisable. Human error is a constant, and we are especially susceptible to mistakes when performing repetitive, menial tasks. Automated inventory management seeks to remedy this by using software to minimize the need for human input. Automated inventory management software achieves this through various means ranging from barcodes to automated reorder notifications.

Unlike humans, computers are great at handling repetitive tasks. They can also integrate with other systems, making them ideal tools for many different applications. 

What are the benefits of automated inventory tracking?

Automated inventory management has two main benefits: speeding up workflow and reducing human error. This is where barcodes shine. Scanning a barcode is much easier and faster than manual data entry, not to mention much more accurate. While barcodes may not be the most exciting automation available, they arguably bring the most value.

Scanning barcodes may only save you a few minutes here and there, but that time will add up quickly. Not to mention, barcodes work in a very binary way; they either scan or they don’t. Unlike manual data entry, where it’s easy for someone to make a mistake.

Automated inventory tracking is also a great way to protect your business from the unexpected. Inventory management software like inFlow has built-in reorder points, which means when your stock levels dip below a specific level, the system will send an automated notification to let you know it’s time to order more. 

Another incredible benefit is the data that inventory tracking yields. Automated inventory management software tracks sales as they happen, providing a comprehensive log of when they occur. Collecting this data will improve a business’s demand forecasting in the long term. These forecasts help guide business decisions and can also help identify cost-saving measures.

Key features for automated inventory software

Not every automated inventory management software functions the same, but unsurprisingly, they tend to operate on the same principles. In the same vein, there are some must-have features that any automated inventory management system should have (some of them we’ve already touched on).

Barcodes 

We’ve mentioned barcodes a couple of times already, and that’s because much of automated inventory tracking hinges on them. When an employee scans a barcode, the machine matches it to the relevant product within the barcoding software. This simple function allows you to automate several tasks, such as picking, stock adjustments, cycle counts, and more. Without barcodes, the efficacy of automated inventory management decreases drastically. 

Real-time tracking

Real-time tracking means that inventory information updates whenever a change occurs. Accurate assessment is crucial when making business decisions; real-time tracking always provides an accurate picture. This is particularly useful when your business operates from multiple locations. When you take something from one location, all other locations will be automatically updated. 

Integrations

These days, businesses often rely on multiple different software solutions to perform various tasks. For example, you might use inFlow for automated inventory management and QuickBooks Online to handle accounting and other financial information. It’s important that these systems can talk to one another, which requires a robust list of integrations.

For instance, inFlow integrates with QuickBooks Online, which automates two-way payment sync. This allows you to push payments from inFlow to QuickBooks Online and pull payments from QuickBooks Online to inFlow—no more double data entry.  

Reporting

Inventory management software stores quite a bit of data. It collects sales information like quantity, date of sale, price, and so on. This data is super helpful, but organizing and analyzing it in a meaningful way can be tricky. Thankfully, automated inventory management software will handle the grunt work for you. As a result, all you need to do is click a button to generate various reports easily. 

Reorder point notifications

Inventory drives revenue—without inventory, there can be no purchases. That means you’ll need to stay on top of your inventory levels to avoid potential stockouts. Reorder points are a great way of automating this process. They ensure you maintain the perfect balance of stock to prevent both stockouts and carrying excess inventory.

How to implement an automated inventory system

If you’re looking to implement your own automated inventory management, it’s important to remember that your needs are unique. Even businesses operating in the same sector or niche may have different procedures. For that reason, we can’t offer a perfect guide to finding a solution, but we can provide some general steps. 

First, identify your business needs. Are you looking to improve the accuracy of your stock level records? Are you trying to reduce inventory shrinkage, or is there something else entirely? Your business needs will ultimately decide the ideal solution, so it’s important to know what exactly you need while looking. 

Once you find an automated inventory management solution with all the features you want, you’ll need to set up your automation. This step is easily the most time-consuming but is a one-time process. Once you’re set-up, you should be good to go for a while. 

If you plan to use barcodes, you must generate, print, and label all your inventory. To use reorder points, you’ll need to calculate them for each of your products. If you’re interested in integrating your various software solutions, you’ll need to go through the process of connecting your software solutions. 

Does it save money for small businesses?

Short answer: yes.

While automated inventory management software often has a recurring cost in the form of a subscription, it still saves money in the long run. This is mainly because it dramatically reduces the need for staffing. Labor is expensive, and reducing workforce requirements while allocating it elsewhere is a tremendous boon. 

This is without taking into account additional costs incurred by human error. Human error can be exorbitantly costly, and avoiding it as much as possible is yet another reason to favor automated inventory tracking. 

The post Avoid Costly Mistakes with Automated Inventory Management Software appeared first on inFlow Inventory.

• Inventory shrinkage is the loss of stock due to factors like errors in inventory management, damage, or theft.
• High inventory shrink will increase the cost of goods sold (COGS) and decrease profit margins.
• Poor inventory management techniques, human error, and theft are the most significant contributors to inventory shrinkage. 
• It’s almost impossible to eliminate inventory shrinkage, but there are ways to reduce it.

Running a business comes with plenty of challenges. You’ll need to balance customer demand, manage cash flow, and stay ahead of competitors, to name just a few. On top of these everyday pressures, inventory management presents its own hurdles. Business owners must ensure they have the right products available at the right time while avoiding stockouts and overstock. But even the best-laid inventory plans can be undermined by an often-overlooked issue: inventory shrinkage.

This is a common yet costly issue faced by businesses of all sizes, and unfortunately, no one can avoid it entirely. But what is inventory shrinkage? How does it affect your business? And, most importantly, how do you combat it?

What is inventory shrinkage? 

Inventory shrinkage is an umbrella term that businesses use to refer to inventory losses that were not part of sales. For example, let’s say that a business has 200 product units. Out of those 200 units, they sell 180 but then fail to find the other twenty. That’s inventory shrinkage in a nutshell. It’s missing inventory that a business purchased but can’t sell for various reasons, which we’ll go into more detail later.

How to calculate inventory shrinkage

You can calculate inventory as a value, a unit figure, or a percentage. Fortunately, the formulas to calculate inventory shrink are pretty simple. We’ll use our example from above for the sake of these equations.

Value 

The equation to calculate shrinkage as a monetary value is as follows: 

Inventory shrinkage = inventory book value – inventory actual value

For the sake of this example, we’ll assign a unit value of $5. That means the inventory book value is $1000, and the actual value is $900. When we say actual value, we mean the actual realized gain you received from selling the items. Plugging those into the equation, we get the following.

Inventory shrinkage = $1000 – $900

Inventory shrinkage = $100

Therefore, the business lost $100 worth of items due to inventory shrinkage. 

Unit 

You can use the same equation to calculate unit shrinkage. Just substitute value with units. Here’s what that looks like: 

Inventory shrinkage =inventory book total – inventory actual total

And we already have these figures; 200 and 180 respectively. 

Inventory shrinkage= 200 – 180

Inventory shrinkage = 20

Therefore, the business lost 20 units due to inventory shrinkage.

Percentage

Calculating the percentage of inventory shrinkage is a bit more complicated. Instead of calculating the percentage of units missing from the whole, you’ll calculate the total value missing. This gives a more accurate picture of how much inventory shrinkage costs a business. Here’s what the equation looks like. 

Inventory shrinkage = (shrinkage value / book value) x 100

We’ll reuse the value figures here, just in a different order. 

Inventory shrinkage = $100 / $1000 x 100

We can remove the dollar sign without consequence here. 

Inventory shrinkage =0.1 x 100 

Inventory shrinkage = 10%

Pretty simple. Right? Unfortunately, despite that simplicity, inventory shrinkage has major implications for affected businesses. 

How does inventory shrink affect businesses?

Inventory shrinkage is pretty much always a net negative for businesses. There are some peripheral cases– like with charity– where they may be overall neutral, but those are exceptions, not the norm. Aside from the obvious monetary loss that comes with inventory shrinkage, there are other impacts on your business. Here are some of the major ones.  

Increases COGS 

Generally speaking, businesses purchase products in bulk. It decreases the cost per unit, in turn lowering the cost of goods sold (COGS). Inventory shrinking effectively increases the cost per unit, which in turn increases the COGS.

Incur additional costs 

Missing inventory means ordering replacements. Some businesses might forgo replacing missing products, but they’re still losing money at the end of the day. With that said, inventory forecasts are becoming more and more precise, which means even a few missing units may result in missed sales opportunities.  

Price increases

Increasing your prices is one way to offset the impact inventory shrinkage has on your business. Of course, the obvious downside is that customers may look elsewhere. Since inventory shrink is pretty much a guarantee for any business, it should be priced into your unit cost. This way, you can avoid having to raise prices unexpectedly. 

Loss of brand loyalty

Inventory shrinkage causes revenue loss in other ways than the monetary loss of physical products. Not having a specific product available will not only mean your customers will look elsewhere but also hurt your brand loyalty. 

Common causes of inventory shrinkage

Many things can lead to inventory shrink. Some of them are relatively benign, while others involve outright crimes. Something to note here is that the average inventory shrinkage for US retailers has been increasing by 1.6% in 2022. That 1.6% might seem small in the grand scheme of things, but it equates to nearly $100 billion in lost revenue. 

Theft 

Shoplifting and organized crime make up a large portion of inventory shrinkage for retailers. Employee theft is also common, but it’s crucial not to make baseless accusations. Depending on the type of product, it may be a more frequent type of theft. Small electronics are valuable and easy to hide, for example.

Spoilage 

Inventory shrinkage just refers to unsold inventory. That doesn’t necessarily mean that it’s missing; it’s just that a business can’t sell it to a customer. For example, shrinkage is a big issue in the restaurant industry, where they almost exclusively use perishable goods. 

Human error

When all is said and done, human error is a constant. You can’t eliminate it entirely, no matter how hard you try. Maybe one specific employee was tired, maybe the shipping company didn’t secure things as tightly as normal. Whatever the case, there’s bound to be human error present in some way. 

Ways to reduce shrinkage

To be clear, eliminating inventory shrink is nearly impossible. There’s simply too many moving parts, and at the end of the day, human error is a constant. However, that’s not to say there aren’t ways to protect yourself from inventory shrinkage and ensure you keep it to a minimum. 

Practice lean operations

Lean inventory is a method that minimizes the amount of inventory that a business carries. You can think of it like this: if “normal” inventory is an ocean, lean inventory is a river. It means carrying little to no surplus. Instead, lean businesses carry just enough to fulfill orders. This lowers overall operation costs and reduces the number of errors by reducing the amount of inventory. A good example of this would be just-in-time inventory (JIT).

Perform regular counts

Counts are an essential part of staying on top of inventory. Regular counts keep information accurate. However, they’re a massive undertaking, so doing them too often could result in a lot of operational downtime. It’s best to plan them on a periodic schedule and stick to it. 

Use inventory software 

Another great way of reducing errors is by using software. Computers can complete simple tasks much quicker than humans and with fewer errors. These errors are also usually easier to fix or solve. For example, an inventory management system tracks product flow in real-time– and will help you identify where inventory went missing. 

How inFlow can help reduce inventory shrinkage

Trust me, we know how frustrating inventory shrinkage can be. It’s one of the common reasons some customers have started using our inventory management software, inFlow.

Our software gives users real-time inventory tracking with multi-location support. We have a built-in barcoding system to help reduce human errors and speed up your workflow, a robust reporting feature, and stock-level alerts. We even allow you to restrict user access, which will help reduce theft.  

So, if you want to start reducing your inventory shrinkage, consider giving inFlow a try. We promise you won’t regret it!

The post Effective Strategies to Prevent Inventory Shrinkage appeared first on inFlow Inventory.

• MRO inventory stands for maintenance, repair, and operations.
• It’s a specific class of inventory that refers to materials and supplies used to keep business operations running. 
• MRO inventory is not a part of the final product.
• Properly managing MRO helps a business operate more efficiently and increase profits. 
• Poorly managing MRO can cause a loss in profits due to downtime, production issues, and unsafe working conditions. 

When you’re running a business, you’ll need to manage a lot of different types of inventory. Most companies focus most of their attention on product-related inventory, such as raw materials, components, and finished goods. But there’s another type of inventory that’s just as crucial to keep everything running smoothly: MRO inventory. 

MRO inventory (maintenance, repair, and operational), which encompasses supplies, tools, and equipment, plays a crucial role in any business. It ensures that operations stay on schedule and productivity remains as high as possible. So, what is MRO Inventory? What role does it play, and why is it important? And how should businesses manage it? Let’s look at this often-overlooked inventory type in more detail.

What is MRO inventory?

It’s fairly easy to guess what the MRO meaning is. Also called MRO supplies, it refers to inventory a business uses during production. There’s a caveat, though: MRO inventory can’t be part of the final product. Anything used during the production process that becomes a part of the finished product would be considered raw materials or components. 

For example, take an electronics manufacturer that specializes in semiconductors. The assembly of the semiconductors requires various metal pieces, silicone, and epoxy. It also requires personal protective equipment (PPE) and tools to assemble the pieces. In this example, the raw materials are the metal pieces, silicone, and epoxy; the PPE and tools are the MRO inventory.

However, MRO inventory doesn’t just relate to things directly used in the production of the semiconductors. A plethora of other things that assist in business operations also fall into this category. For instance, scales, pallet jacks, and machinery would also qualify as MRO inventory.

These items are essential to the production process but absent from the final product. As a result, we can classify these products as MRO supplies.

MRO inventory examples

There are a slew of things that can be considered MRO inventory. It really depends on what type of business you’re running. Manufacturers tend to have more MRO inventory to worry about, but make no mistake; every business has MRO inventory. Here are some common examples of MRO inventory:

• Consumables – Cleaning supplies, light bulbs, and cleaning solutions.
• Maintenance supplies – Lubricants, tools, cleaning equipment, and janitorial supplies.
• Operational supplies – PPE, printer paper, printer ink, staplers, paper clips, and other office supplies
• Repair parts – Motors, gaskets, springs, seals, filters, and any other replacement parts needed for equipment. 

Generally speaking, businesses can break down MRO inventory into three categories:

• Production MRO – All parts, tools, and equipment necessary to keep processes running would fall into this category. 
• Administrative MRO – This category is for any items used in the day-to-day business operations, such as office supplies and IT hardware. 
• Facilities MRO – Any items used to maintain your place of business belong in this category. This includes things like light bulbs and safety systems.

Why is MRO important?

New businesses or companies tend to overlook MRO inventory. In some ways, it’s understandable. After all, it doesn’t generate revenue, so why spend time and resources on it? Well, because it does generate revenue. Just not directly. There’s a famous saying: “A penny saved is a penny earned.” 

It’s a saying that applies to running a business. Saving a penny on overhead costs is just as good as earning an extra one. Properly managing MRO inventory is what gives a business the ability to operate in the face of suboptimal conditions. 

Properly managing MRO inventory will ensure your business is always running smoothly and prevent unnecessary downtime. 

What are the benefits of proper MRO management? 

Companies who take the time to manage their MRO supplies see quite a few benefits. We briefly touched on some already, but here’s a more detailed explanation of the benefits. 

Workflow efficiency 

Staying on top of MRO inventory generally leads to higher efficiency. While mistakes and accidents will inevitably happen, mitigating the effects goes a long way in increasing efficiency.

Cost reduction 

At the end of the day, MRO inventory is just that: inventory. And as a result, properly managing it can cut operating costs. However, purchasing MRO supplies and adequately managing them can be tricky. More on that later. 

Longer equipment lifespan

Generally speaking, when you keep up with the maintenance of your facility, equipment, and tools, you’ll increase their life span. While it may cost more money in the short term, it’ll pay off in the short term. Think of it as an investment in your business. Properly maintained equipment also operates more efficiently, increasing overall productivity. 

What are the consequences of neglecting MRO inventory?

Depending on the industry and manner of products/services provided, there are many possible consequences of neglecting MRO supplies. They can range from delays and downtime to lawsuits and a total shutdown. 

Let’s go back to our imaginary electronics company. Say the facility runs out of PPE supplies, and rather than shut down production, the company opts to keep things running. As a result, during production, a mishap leaves one employee with an injury. Something small like that could severely damage the company, not just financially but also its reputation. Not to mention, depending on the industry, neglecting equipment may also go against regulations, which could be grounds for hefty fines or worse. 

A more innocuous example would be if your business ran out of light bulbs. While it may seem like a silly inconvenience, it would make it hard for staff to work effectively in the dark. 

MRO best practices

Like any other inventory management endeavor, properly managing MRO supplies can be challenging. For starters, traditional forecasting methods, like market trends and customer demand, don’t apply to MRO inventory. However, that doesn’t mean there aren’t some best practices you can follow. Here’s a few to help out. 

Classify and rank MRO inventory 

Not every MRO product is of equal importance. For example, fixing equipment is more important than repainting it. Figuring out which MRO inventory is more important than others lets businesses prioritize mission-critical equipment above all else. Over time, companies can use this data to help them create a restocking cycle. 

Implement safety stock and reorder points

Knowing limits is important. Especially when it comes to MRO supplies, it’s best to purchase as little as possible, while ensuring you don’t run out of stock. To do this, choose realistic reorder points and safety stock levels for your MRO inventory. Remember, MRO inventory should still follow the same basic principles of inventory management, so you should always consider safety stock and reorder points. 

Know seasonal trends

The seasons affect most inventory in one way or another. For example, certain times of the year may require longer hours and more production time. This, in turn, will lead to more wear and tear on equipment, which means you’ll need more replacement parts. 

Make decisions based on data 

Most businesses collect a wide variety of KPIs (key performance indicators), ranging from sales volume to customer information. You may not be able to rely on sales data to predict your MRO inventory needs, but you can still look back at historical data. If you examine what you used in the past, you can better predict what you’ll likely need in the future.

Use software where possible

Before the digital age, everyone had to keep track of things by hand. The accessibility of computers has changed that. Now, software helps businesses across the globe with a variety of tasks. Our inventory management software inFlow can help track MRO inventory in real-time, and it offers integrations with other popular software solutions like QuickBooks Online and Shopify. There is also a built-in barcoding system that helps automate a ton of the work related to managing your MRO supplies.  

Conclusion

While often overlooked, MRO inventory plays a crucial role in nearly every business. It plays an indispensable role in ensuring that your business operations continue to run smoothly. Properly managing MRO inventory will minimize downtime, improve efficiency, and help control costs. In a world where time is money, effective MRO inventory management can provide your company with a strategic advantage.

The post MRO Inventory Best Practices for Small Businesses appeared first on inFlow Inventory.

Knowing when a business needs more space (and willingness to purchase that space) is important, but so is maximizing the use of what’s already available. In some extreme cases, optimizing warehouse utilization could reduce or even eliminate the need for additional space, at least in the short term. 

How to calculate warehouse utilization 

Warehouse utilization (also known as warehouse space utilization) is a figure that measures how much warehouse space a business is using. It can take the form of either a percentage or a decimal. 

Calculating warehouse utilization is fairly simple. Divide occupied space by total space. Here’s what that looks like as an equation: 

For example, let’s pretend that a business has 100 feet of storage available and currently uses 70 feet. Plugging those numbers into our formula yields the following: 

70/100 = 0.7

In this example, the warehouse utilization is 0.7, or 70%. 

However, there are a few different methods to calculate warehouse utilization. In no particular order, they are as follows:

• The cube method represents volume.
• The floor method represents square feet.
• The slot method represents storage slots.

The method a business uses will change these numbers. Here’s a more detailed explanation of each method and how they affect warehouse space utilization. 

Cube method 

This method uses cubic feet, or volume, to calculate warehouse utilization. To calculate the total volume of your warehouse, multiply the width by length and then the result by height. For example, let’s say that a warehouse is 10 feet wide, 15 feet long, and 20 feet high. 

10 x 15 = 150

150 x 20 = 3000

In total, 3000 cubic feet of space is available. For this example, let’s say that out of that 3000, the business in question uses 1000 cubic feet. Plugging those into our equation above, we get the following. 

1000/3000 = 0.33, or 33.33%

If space is taken, it’s taken. So, for the sake of this example, we’ll bump these figures up to 0.34 and 34%, respectively. That means warehouse utilization is at 0.34, or 34%. 

Floor method 

The floor method is similar to the cube method but cuts out one dimension. It calculates warehouse space utilization by using square feet instead of cubic feet. To calculate available square footage, multiply the warehouse length by width. We’ll reuse the figures from above. 

10 x 15 = 150

In total, 150 square feet of space is available. For this example, let’s say that the business in question uses 72 of that 150. Plug those into the warehouse utilization formula. 

72/150 = 0.48, or 48%

Slot method

The slot method is a bit more complex than the other two. It relies on warehouse slotting, an organizational method, to calculate warehouse utilization. In simple terms, warehouse slotting involves creating “slots” that your products occupy. The size of these slots will vary from business to business. 

For this method, we’ll discard the previous figures entirely and say there are 20 total slots. We’ll also say that products occupy 5 of those slots. Plug those into the warehouse utilization formula. 

5/20 = 0.25, or 25%

What is a healthy utilization rate? 

You might have noticed that these numbers seem a bit low. The highest is 48%, which means 52% of the warehouse isn’t in use. However, bigger isn’t always better. In most instances, going higher than 85% causes congestion issues; even utilization as low as 25% can be “healthy.” 

Product isn’t the only thing inside the warehouse at any given time. Workers need space to move products and equipment; too little free space can prove hazardous. 

How can I optimize my warehouse space? 

Optimizing warehouse space brings a lot of benefits. Most importantly, it ensures businesses make the most of the space they pay for. This is crucial, especially when considering rising costs. It can also decrease the time it takes your business to expedite orders, increasing customer satisfaction. Here’s a few best practices to improve your warehouse utilization. 

Use vertical space efficiently 

Making use of all available space is obvious, but using it appropriately is less so. For example, you wouldn’t want a product that’s 2 feet tall to occupy a slot that’s 6 feet tall. It’s a waste of space, plain and simple. 

Improve warehouse layout 

Optimizing warehouse space isn’t just about fitting more products in the same area. Rearranging pallets and products alike to improve the flow of products can significantly increase productivity. Over time, increasing productivity in this manner pays off. 

Implement software

Efficient warehouse space utilization boils down to planning and organization. However, planning the most optimal routes for your inventory flow can be challenging. Software might not be able to do the (literal) heavy lifting, but it can help you better manage your inventory. inFlow’s warehousing software can automatically generate high-efficiency routes throughout any given warehouse, increasing pick-route efficiency. 

Consider other storage strategies

Of course, it’s also important to consider what warehouse strategy will work best for an individual business. Large products can be difficult to store, but the same goes for small ones. Generally speaking, there are three methods when it comes to organizing a warehouse: fixed location, floating location, and zonal location.

Fixed location 

A fixed location refers to a permanent, dedicated storage location for a specific product or stock keeping unit (SKU). Having a permanent location for high-demand products can substantially increase warehouse productivity. 

Floating location 

The opposite of fixed location, floating location (also known as random location) means storing products wherever they fit. It might sound antithetical to organization, but sometimes product catalogs change frequently. Sometimes, it’s best just to put things wherever there’s room. 

Zonal location 

A zonal organization scheme involves breaking warehouse areas into specific zones to hold specific product groupings. For example, perishable products might be on one shelf, and non-perishables may be on another. Breaking down warehouses into these zones can increase warehouse efficiency. 

Wrapping up

Making use of every available resource is crucial for a business’s health. Optimizing warehouse utilization, especially, continues to remain a key factor amidst rising operational costs. Additionally, optimizing warehouse routes and implementing proper organizational practices continue to play a role in overall efficiency.

The post Warehouse Utilization Strategies For Your Small Business appeared first on inFlow Inventory.

A stockout means lost sales, diminishing customer loyalty, and, in extreme cases, could lead to your business going under entirely. After all, in the world of business, every sale counts. So, what exactly is a stockout? How does it happen? And most importantly, what can you do to avoid a stockout? 

What is a stockout? 

Even as a consumer, you’ve almost certainly experienced a stockout before. As its name suggests, the term refers to when a business completely exhausts its product supply. It could be anything, from everyday items to 72-inch televisions. While the financial implications of a lost sale are obvious, there are other effects that could negatively affect your business. Thankfully, there’s ways to mitigate the risks.

What causes stockouts?

Any business can fall victim to a stockout for several reasons. Some common causes of a stockout are:

• Poor inventory management—Inefficient inventory management is the most common cause of a business running out of stock. If you’re not closely monitoring the flow of goods through your business, it’s only a matter of time before you experience a stockout. Here’s the good news. Improving your inventory management is one of the easiest things to remedy. 
• Supply chain disruptions—A stockout can occur anywhere on the supply chain, affecting the flow of goods. Take COVID-19 for example. It had a profoundly negative effect on supply lines worldwide, and no one could predict it. Regardless of how well you manage your inventory, supply chain disruptions can and will trickle down to your business. 
• Inaccurate demand forecasting—Demand for products will fluctuate from season to season, and accurately forecasting the needs of your business can be tricky. Using historical data and looking at market trends are great places to start if you aim to forecast demand accurately.  

Of course, countless other issues can cause your business to run out of stock. For example, if you buy and sell internationally, maybe there’s new legislation. Even an error on a spreadsheet could easily cause a stockout.  

How will a stockout affect your business?

Depending on the type of business you run, a stockout will impact your business in different ways. These are some negative implications you can expect to experience in the event of a stockout: 

• Lost sales and revenue—No matter what industry you’re in, a stockout will result in lost sales and revenue. For example, retailers will have fewer products on their shelves. Manufacturers will have to shut down entire assembly lines if their raw materials run out of stock, which will cause missed shipments. Construction workers may be unable to complete a project on time without the proper materials.
• Decreased customer loyalty—In the modern age of business, things move at breakneck speeds. If you experience a stockout, chances are the consumers aren’t going to wait around for you to get it sorted. They’ll take their business elsewhere. The effects of lower customer loyalty are difficult to quantify but will often make or break a business.
• Damaged reputation—When you experience a stockout as a consumer, your faith in that business diminishes. Over time, this can severely damage your brand’s reputation and cause customers to flee. For example, let’s say you hire an HVAC company to fix your furnace, and they take a week to get the job done due to a stockout. It goes without saying you’ll never recommend that company to a friend; in fact, you may warn others to actively avoid them.   

How can you prevent stockouts? 

Unfortunately, preventing them entirely is nearly impossible. This is because, as we established, a stockout can arise because of an issue anywhere in the supply chain. You may be in control of what happens under your purview, but controlling other establishments is out of the question. 

As a result, it’s generally better to focus on reducing them as much as possible. Most of that comes down to having infrastructure in place beforehand. Here are some best practices you should consider implementing to help prevent a stockout. 

Maintain a healthy level of inventory 

When you keep a surplus of inventory, it will certainly help prevent the potential for a stockout. However, it’s essential to understand that there is such a thing as too much inventory. Carrying excess inventory is also harmful to your business. If you keep a surplus of too many products, your carrying costs will eat away at your overhead.

Perform regular cycle counts 

While it won’t help with supply chain issues, keeping tight control of your inventory helps avoid short-term stockouts. When you perform a cycle count, you ensure that what you have on paper matches what you have in storage. After all, inventory shrinkage is an inevitable part of doing business.

Establish solid supply lines

One thing you can do ahead of time is invest in finding reliable supply lines. Whether you’re a retailer or a manufacturer, you need to get your inventory from somewhere. Take the time to find reliable suppliers with a good reputation. But don’t limit yourself to just one supplier. If your business depends on a single supplier, you become more vulnerable to stockouts.   

Use safety stock and reorder points

Keeping a certain amount of safety stock available for those “just in case” moments is common among business owners. Safety stock also plays into reorder points, which are another great way to reduce the occurrence of stockouts. You can calculate reorder points for each of your products to give you an indication of when you need to reorder more stock.

We put reorder points into inFlow ages ago because we know how important they are to business owners. When inFlow users’ stock dips below a reorder point, they’ll be notified immediately. This empowers them to order more stock at the perfect time to ensure they’ve always got what they need when they need it.

Use inventory software

Preventing a stockout comes down to preparation. Much of that preparation requires implementing processes, careful counting, and some data collection. Having proper inventory software helps with all of this.

In addition to automatic reorder points, inventory control software like inFlow keeps track of your inventory in real-time. We make managing your suppliers simple by giving you easy access to their details, past order histories, and lead times, all in one place. Our reporting features will also help you analyze historical sales data and give you the information you need for accurate demand forecasting.    

To sum it up

Stockouts can have a profound impact on businesses beyond the initial financial blow. While they may be inevitable, that doesn’t mean you shouldn’t take measures to reduce their frequency. Focus on the things you can control to avoid running out of stock, like implementing the right processes and using the right tools. These things can make a world of difference and protect your business from future stockouts.

The post Why a Stockout Can Be Dangerous For Your Small Business appeared first on inFlow Inventory.

Amazon’s two-day shipping on nearly every product for Prime members is a large part of the platform’s continued dominance in the ecommerce market. Matching Amazon’s consumer-aiming policies is a pipe dream for most businesses, but there are still lessons to learn. 

Vendor-managed inventory (VMI) takes from one of those lessons. It’s a B2B process that aims to lower lead times by encouraging deeper collaboration between supplier and retailer. But what is VMI inventory? And is it right for your business?

What is vendor-managed inventory?

The textbook VMI meaning is a system in which a vendor manages and maintains inventory for a client. Instead of managing orders and inventory levels, buyers rely on their vendors to ship them products as needed. 

The concept itself is simple, but there’s a lot of jargon. It’s also not entirely clear who the “vendor” and “buyer” refers to. 

So, let’s break things down a bit. 

How does VMI inventory work?

Let’s pretend you own a business supplying products to dental offices. There are various product types, all of which sell at different frequencies. You’ll need to carefully track the sales data for each product type to ensure you maintain optimal inventory levels. The last thing you want is to encounter a stockout or be stuck with excess inventory.

A vendor-managed inventory system makes a lot of sense in a case like this. The supplier will ship products on their own accord, usually based on data your business shares. They decide when to ship more products and how large each shipment is. It offloads some of the responsibility to the vendor and saves you time. In this case, your supplier is the “vendor,” and you, the retailer, are the “buyer.” 

Vendor-managed inventory aims to reduce costs across the entire supply chain. Ideally, you’ll also save on warehouse space and shipping costs. Optimizing the supply chain also increases availability and can reduce lead times.

Challenges of vendor-managed inventory

Even compared to similar systems, using vendor-managed inventory incurs unique challenges. Some are simple and easy to resolve, but others can be difficult to deal with. Choosing business partners wisely is always important, but it’s arguably even more critical for VMI inventory. After all, you’re surrendering a lot of control to your suppliers, so you better make sure you can trust them. Here are some challenges you may face when implementing vendor-managed inventory.  

Data sharing 

In vendor management inventory, the vendor is responsible for providing relevant amounts of product when needed. This process necessitates some level of data sharing, which allows vendors to find the correct reorder points for each product. However, sharing data without outside organizations is always risky, so choosing a reputable partner is crucial. 

Another way to mitigate the risk of sharing data with vendors would be using the right inventory management software (more on this later). 

Frequent, transparent communication 

Vendor-managed inventory requires quite a bit of back-and-forth. More than that, it requires both parties to be honest with each other. Supply issue? Can’t afford the order size? Inform the other party immediately. The nature of VMI inventory also requires coordination between both parties, which warrants more communication anyway. 

Culture clash 

Sometimes, two groups of people just don’t get along. There’s nothing wrong with that, but it’s difficult to overlook when considering the trust involved in a VMI system. Core values must align for a relationship to be long-lasting. Otherwise, you risk a potential future fallout with a key supplier.  

Solving vendor-managed inventory challenges 

There’s a few ways you can solve these problems. Remember, though, that vendor-managed inventory isn’t for everyone. Some businesses require complete control over their inventory, meaning VMI inventory isn’t a good fit. However, if you are considering implementing vendor-managed inventory, here are some ways to solve common issues you may encounter. 

Align key performance indicators 

Key performance indicators, or KPIs, are crucial when considering a restock. With two parties involved, it’s essential to ensure that performance goals align. If one party is off track or has a different goal in mind, things tend to get messed up. Tackling this ahead of time will save a lot of pain later down the line.

Use a cloud-based inventory management system

Cloud systems are the easiest way to create a shared ledger. Our perpetual inventory control system, inFlow, records changes in real-time, letting both parties access accurate information from anywhere. It’ll also help by creating valuable reports for sales forecasting, an essential part of a good VMI relationship. 

With inFlow, vendors can set reorder points for your inventory that automatically generate purchase orders once stock reaches a certain level. These POs would then be sent to someone at the business to review and approve before the vendor fulfills them. You could also set up your vendors as limited users in inFlow. When reorder points are reached, they can initiate stock transfers and bill you for whatever you consume at the end of a given period. 

Is VMI inventory right for my business?

There’s a few signs that might indicate you should switch to a VMI system. If you frequently run out of stock or fail to meet demand, you may benefit from offloading some responsibilities. We’ve put together some metrics to consider if you’re considering switching to vendor-managed inventory.

Sell-through rate 

Sell-through rate (STR) indicates how much inventory you sell in comparison to how much you receive. The higher the number, the better. If this number is extremely low, that usually means overstocking. The formula for STR is simple.

(Units sold / (beginning inventory + units received)) x 100

Inventory turnover rate 

Inventory turnover rate represents how quickly a business sells stock and replaces it. Higher numbers generally indicate strong sales figures, while lower numbers indicate weak ones. You’ll need to know your cost of goods sold (COGS) to calculate this one. 

First, calculate your average inventory. Add the beginning and ending inventory and divide by two. Once you have that, plug the figures into the following equation. 

COGS / average inventory = inventory turnover rate

Backorder rate

The backorder rate may be another reason to turn to vendor-managed inventory. The backorder rate is the number of orders a business was unable to fulfill. This number essentially records lost sales. 

There can be many reasons for a high backorder rate, but poor inventory management is a common culprit. Here’s the formula for the backorder rate: 

Total backorders / total orders = backorder rate

Summing up

Setting up vendor-managed inventory can be a great way to optimize your supply chain. While it may be beneficial overall, it requires a certain level of trust between both parties. It’s best to be selective and take the time to find reputable partners. 

However, even with the best relationships, VMI inventory hinges on reliable data. Implementing vendor-managed inventory without proper cloud-based software is a recipe for disaster.

The post How Vendor Managed Inventory (VMI) Can Reduce Lead Times appeared first on inFlow Inventory.

But what makes inventory management for solar companies more difficult? And how can solar installers make things easier?

Solar inventory management challenges

Experts predict that the renewable energy industry will continue to grow in 2024. This means many solar installers will experience rapid growth in the coming years, along with all the challenges that come with that growth. 

Now, to be clear, some of the challenges are not unique to solar installers. Truthfully, many inventory management challenges don’t discriminate between industries. An issue in one industry will almost certainly be an issue in another, but the severity of the problem for solar inventory management and how you handle it may differ. 

Here are some things to consider when dealing with inventory management for solar companies.  

Expensive inventory 

Solar installers offer much more than just physical goods, but at the end of the day, customers are paying for a working solar system. Solar panels are an essential part of that system, and high-quality ones tend to be expensive. That on its own isn’t an issue—there’s a lot of expensive products out there— but the real problem is that they’re also fragile. 

Like any business that deals with physical goods, solar installers will inevitably experience shrinkage. This can be caused by several things, such as damaged components, defects, or lost items. As such, most businesses plan for a certain margin of error, but the premium price of solar panels makes shrinkage much more damaging.

Proper inventory management for solar companies means tracking expensive components to ensure you know exactly what you have across multiple job sites. It will also ensure you only keep what you need on hand and don’t overstock. After all, hanging on to expensive excess inventory is a liability every business should avoid. 

Various components and tools to track 

Of course, solar panels aren’t the only thing to worry about. Many other smaller parts are necessary for installation. They’re not as expensive as the panels themselves, but they’re no less critical and much easier to lose track of. The necessary components also change slightly depending on the work site, which can make locating them even more difficult. 

Different job sites will require not only different components but also a different set of tools. Solar installers may need different equipment depending on the existing architecture. The equipment could also differ according to the scope of work. 

Shifts in demand

Seasonal demand is commonplace across most markets, but the solar industry is affected by more external factors than most. Alongside state and federal legislation, even broad factors like climate change can affect demand for solar. 

This necessitates careful consideration of the future. It’s a bit of a balancing act. Purchasing too much inventory ties up capital in storage, but too little can slow down business. Inventory management for solar companies is generally more precarious because of high inventory costs. 

Special storage requirements

Solar panels are large; more surface area means more solar power, which means more savings. But couple this with their fragility, and you’ve got a high-value product that’s difficult to store—not a great combination. It may be necessary to rent specialized warehouse space not only to ensure you have the required space but also to keep your high-value inventory safe.

Routing difficulties

Inventory management for solar companies will experience many of the same issues other field service workers come across. One such problem is overseeing the delivery of necessary inventory to the proper locations. If you store your resources in different warehouses or locations, incorrect routing can slow everything down. 

Impractical inventory routing is a big reason we recommend solar companies switch to a mobile job site workflow. This method turns service trucks into mini-warehouses on wheels so you can effectively track your components on the go across multiple job site locations. Of course, you’ll need cloud-based inventory software for this workflow to function (we’ll get more into this later).

Inventory management for solar companies

It’s important to remember that it’s nearly impossible to eliminate inventory-related difficulties entirely. If running a solar installation business were smooth sailing all the time, everyone would do it. Still, alleviating these issues as much as possible is important to maximize profits. Here are some possible solutions. 

Commit to proper solar inventory management software

The most straightforward way to keep track of everything is to commit to proper inventory management software. Cloud-based field management software, like inFlow, tracks your inventory and assets in real-time, ensuring everyone knows where everything is at all times.

Our software makes inventory management for solar companies easier than ever. You can set reorder points for all your products so you’ll always have the perfect amount of stock. Our reporting features make it easy to forecast demand. We even have a built-in barcoding system to help speed up your workflow while increasing accuracy!

Implement just-in-time inventory

There are also many different inventory management methods. For solar installers specifically, just-in-time (JIT) makes a lot of sense. It’s a method that prioritizes having the absolute minimum amount of inventory. It does this by using data and working closely with suppliers to receive products as they’re needed. For example, if your company has a job in a week, the products won’t arrive until shortly before work starts. Because solar companies work with expensive components, JIT helps them maximize cash flow. 

Store inventory in multiple locations 

In some instances, splitting materials and components into different warehouses saves money. Throwing everything into the same warehouse can be tempting, but that’s not always the most efficient. It may be better to rent space that specializes in storing solar panels, and store other components elsewhere. 

Another option, as we mentioned earlier, would be adopting a mobile job site workflow. This would help your company stay agile and avoid the extra overhead it would cost to rent more warehouse space. However, inventory management for solar companies will require at least some physical warehouse for storage due to the size of solar panels. 

Invest in data analytics

As with anything, inventory management for solar companies can yield quite a bit of data. This data is helpful for a variety of applications. For example, long-term data collection is a crucial part of demand forecasting. Predicting sales is especially vital when working with high-cost materials like the requisite solar panels.

This is yet another area where inFlow can help. Our software lets you pull all kinds of reports to help you forecast your demand. 

Wrapping up

When it comes down to it, the purpose of a business is to make money. Businesses in the solar industry are no different. However, increasing revenue and maintaining a healthy cash flow can be difficult because of the high component cost. Inventory management for solar companies ideally focuses on keeping inventory as low as possible to maintain healthy capital.

The post How to Optimize Inventory Management for Solar Companies appeared first on inFlow Inventory.

It shouldn’t come as a surprise that small businesses always look for effective methods to keep track of inventory. Two of the most common costing methods are first in first out (FIFO) and last in first out (LIFO). 

Today, we’ll review FIFO vs LIFO, their differences, and what businesses they’re suitable for. But first, it’s important to understand what inventory valuation is and why it’s so important.

What is inventory valuation?

As the name suggests, inventory valuation is the business practice of assigning a monetary value to existing inventory. And although that sounds simple, there’s a lot more at stake than just FIFO vs LIFO. It also carries some legal ramifications. 

For example, the IRS asks that companies stick to one valuation method for their first year of operation, and they must ask permission to make changes in subsequent years. 

FIFO vs LIFO: Why do they matter?

Outside of legal requirements, a business’s inventory costing method directly reflects its potential profitability. This is because the way that a business values its inventory has a direct effect on different data points. Like cost of goods sold (COGS), which will impact how you price your products and services. These figures also affect a business’s plans for the year and can influence external investment decisions as well. 

So, how do you calculate your inventory’s value? There are a few different ways, but in this article, we’ll focus on two of the most popular, FIFO and LIFO. 

LIFO vs FIFO: what’s the difference?

Before we address the differences in FIFO vs LIFO inventory valuation, it’s helpful to have a working comparison. In this case, for the flow of inventory. Think of it as a rotating door. Ideally, there’s a steady stream of products moving in and out simultaneously. But there’s only so much room, meaning you’ll have to be selective with the order in which you move product out. That’s where the difference between FIFO vs LIFO lies. 

FIFO inventory method

A business using the FIFO inventory method prioritizes selling its oldest product units first. Following this model, they also calculate the net worth of that product unit using the most recent price.

Here’s an example. Let’s say that a bath company purchases 1,000 bars of soap. At the time of purchase, each one has a selling price of $5. At the end of the season, they have 250 bars left, but they restock to prep for the busy season. They purchase another 1,250 bars, this time at $7 per bar. At the end of the busy season, they have 200 bars left. This means that they sold 1,300 bars during the busy season. 

Using the FIFO inventory method, the bars valued at $5 were sold first. The $7 bars are allocated to their remaining inventory. Therefore, under the FIFO costing method, the bath company now has $1,400 in remaining inventory. 

LIFO inventory method

A business using the LIFO inventory method does the opposite. Instead of calculating these figures using the oldest units, they use the value of the newest unit. Let’s re-use the same figures from above to illustrate this. 

The business still has 200 bars left. Using the LIFO costing method, the first bars of soap sold were valued at $7. Therefore, the remaining 200 are valued at $5. Under this model, the business now has $1,000 in remaining inventory. 

Of course, there are more models in use than just these two. So, as a bonus, let’s take a look at average cost!

Average cost

A business using the average cost model does things differently than FIFO vs LIFO. They consider price changes by calculating each unit’s average cost. This model involves a bit more number crunching, so here’s what it looks like using the numbers from the example above.

And there you have it. The average cost for the bars of soap in our example would be $6.11 per unit. 

Is LIFO legal? 

The most important thing when deciding which valuation method to use for reporting is whether LIFO is legal. That might sound like an exaggeration, but it’s not. The IFRS bans the use of LIFO accounting in Europe. 

The only major country that allows LIFO accounting is the USA. This is because the USA uses a different accounting standard, the Generally Accepted Accounting Principles (GAAP.). Many countries ban LIFO because of the tax implications. 

LIFO accounting minimizes reported profits. In many cases, this directly leads to less income tax. Even if LIFO is legal in your area, however, it may not be suitable for you. 

Why use LIFO?

When deciding between FIFO vs LIFO, it’s also important to note that the LIFO inventory method is more difficult to manage overall. It requires businesses to collect more data and maintain highly accurate records. 

Despite the added difficulty, however, LIFO does have its benefits. The same reason that it’s disallowed under the IFRS is the same reason businesses use it. Because LIFO typically reports a lower net income, businesses pay less income tax. This directly increases their overall revenue.

 The LIFO inventory method also helps businesses offset the effects of inflation. Because prices tend to rise during inflationary periods, using the newest price for valuation also leads to lower net income. Which, of course, lowers income tax.

FIFO vs LIFO: Which one is right for you?

The most glaring issue of LIFO is that it requires businesses to hold onto their oldest product units for extended periods. If the product in question is perishable, it risks becoming unfit for sale. As such, business owners should consider the nature of the products they carry. A grocery store, for example, is better off using FIFO vs LIFO. 

Businesses that sell non-perishable goods, such as computers, are likely better off using the LIFO inventory method. Mainly because these items tend to be of a high individual cost. 

Whichever method you use, be sure to research all your available options first. You should also consider talking with your accountant for better insights. 

How inFlow handles inventory costing methods

No matter which costing method you choose, there will inevitably be a lot of math and data to track; there’s no way around it. Luckily, small businesses using our software inFlow don’t have to worry about that.

We designed inFlow to make costing methods super easy for our users. You have four options when selecting a product’s costing method: FIFO, LIFO, moving average, and manual. You just choose which one is right for you and let inFlow do the work for you! 

So, if you want software with costing methods, real-time inventory tracking, a built-in barcode system, and tons of integrations, look no further than inFlow.

The post FIFO vs. LIFO: Choose the Right Inventory Valuation Method appeared first on inFlow Inventory.

On top of optimizing your supply chain, forecasting demand can lower overhead costs and increase revenue. But how? That’s what we’re here to discover, so let’s begin. 

What is demand forecasting?

Demand forecasting is the process of using data to predict the volume of inventory you’ll go through within a certain period. This time period can range from as little as three months to as long as four years. It’s important to keep in mind, though, that the resulting figure is just an estimate. Your actual inventory levels could dip below and just as easily blitz past the prediction. And whatever the case, it’s important to prepare in advance. Incorporating supply chain optimization tools can further refine these predictions, enhancing accuracy and responsiveness in inventory management

Of course, given how much information businesses have at their disposal there’s different types of demand forecasting. Generally speaking, there are 7 different demand forecasting types you should be aware of. 

Passive 

Passive demand forecasting is the most straightforward way to forecast demand. Unfortunately, it also requires pre-existing data to work off, making it impractical for start-ups. Passive demand forecasting works off the idea that the current year’s sales will be similar to last year’s. As a result, it caters more to businesses that prioritize stability over expansion. 

Active 

Active models are much more complicated. They take into account current marketing campaigns, market data, and expansion plans. They also consider external factors, such as economic viability, market growth, and so on. Newer businesses, such as start-ups often use this type of demand forecast, since they don’t have as much historical data to work with. While start-ups make use of active demand forecasting, they’ll also have to rely on some assumptions to complete it. Tread carefully!

Short-term 

This is what we were talking about when we mentioned time periods. Short-term demand forecasting attempts to predict sales volume within a period of 3-6 months. Because of the relatively short period of time, businesses usually use short-term models to make decisions regarding just-in-time (JIT) products.  

Long-term 

As the name suggests, long-term demand forecasting works over a longer period of time, usually 12 to 48 months. And unlike some other methods, it focuses on shaping future growth. As a result, it may be better to think of it as a roadmap or a long-term goal. You can get a pretty good idea of where things will be in four years, but the future is always uncertain. At the same time, business growth sometimes relies on opportunity. Be sure you’re ready to take advantage of it when it shows. 

Internal 

Internal demand forecasting deals with the internal capacity of a business. Growth is often the overarching goal, but not every business is capable of growth. Can you handle increased demand? Is your operation scalable? Can your cash flow keep up with that scalability? Internal models use all these variables and more to create realistic predictions. 

Some businesses also use internal demand forecasting to highlight areas of optimization. If successful, this can increase overall productivity. 

External 

Rather than calculating internal capacity, external demand forecasting focuses on the surrounding landscape. For example, can the market support another competitor? If so, what market share is feasible? External demand forecasting also considers the acquisition of raw materials and other necessary goods. 

Artificial intelligence

The newest one on this list. The term “AI demand forecasting” may seem like a bit of a gimmick, but the truth is AI has a lot to offer when it comes to forecasting demand. While all the prior forecasting methods require humans to collect data, that data still needs to be processed by computers. AI forecasting takes it one step further and uses artificial intelligence to identify common trends in the information. These aren’t just from start-ups, either. IBM, for example, offers an AI demand forecasting system of its own. 

The good and the bad of demand forecasting

Correctly forecasting demand brings many benefits, the most obvious of which is optimizing the supply chain. That, in turn, decreases overhead costs and increases profit. How? Simple. 

Retailers and manufacturers alike usually purchase goods and materials from other sources. This could be raw materials, individual components, or even entire products. Whatever the case, there’s two immediately obvious costs: purchase price and shipping cost. But once it arrives at the warehouse, it continues to cost your business. 

On top of paying to store the product, it’s also taking up space that could hold another product. It could be a worse-selling product, or it could be a better-selling one. If a better-selling one could take its place, you’re effectively losing money. Demand forecasting aims to solve this problem by purchasing enough inventory to avoid selling out altogether. This saves on warehouse costs and leads to an overall revenue increase. 

It’s not easy, though. All the different types of demand forecasting we mentioned before work off of data. And a lot of it. Feeding it the wrong data can lead to disastrous results. And sometimes, there’s just not enough data to work off of. This is especially true for new businesses in new industries. It’s why more and more are turning to software and AI. Our software inFlow, for example, can create various reports with the click of a button. We even integrate with Easy Insights for our customers who want to take their data analytics to the next level. Connecting your inFlow account to Easy Insights lets you assemble custom dashboards to include charts, tables, maps, and more! 

Different strokes for different folks

Or, in this case, different forecasting methods for different industries. You get the point.

Given just how different some industries are, there are a few different methods used to forecast demand. Here’s some of the important ones. 

Sales team estimates

At the end of the day, the sales team has the most direct contact with customers. They see and hear positive feedback and complaints, but most importantly, they see how customers interact with the products. This makes their input valuable. While perhaps not as efficient as a computer, they can also create their own demand forecast.

Trend projections 

This method of forecasting works off of previous sales trends. When sales were highest, when they were lowest, when they took place, and so on. While simple and reliable, filtering out outliers where sales were too high or too low is essential.

Market research 

Market research is usually based on data from customer surveys. It costs a lot to distribute these surveys and crunch the numbers, but is also very rewarding. It can provide unique insights into things like target demographics and other factors that numbers don’t tell.

Delphi method

The Delphi method is complicated. And, unlike other methods, it relies heavily on human input. Under the Delphi method, a business consults several demand forecasting experts. They then aggregate the responses and use them to formulate another set of questions and repeat this process until they reach a consensus. 

Not every business is suited for demand forecasting

At the end of the day, demand forecasting is just one of many tools. And not every tool can be used for every job. Some industries move so quickly that data is too irregular to reveal any patterns. Others are so niche that their sales are always consistent. 

On the other hand, if your business can use demand forecasting, you really should. It offers a plethora of benefits over a wide range of areas.

The post How Demand Forecasting Can Optimize Your Supply Chain appeared first on inFlow Inventory.

While waste occurs throughout the food chain, retailers could significantly reduce the amount of food thrown out. This is good for the planet and can also improve business performance. Look at your current inventory system and consider how you can improve it. You might be able to cut back on waste with a few minor updates to your operations. 

Consider automated inventory controls

The first step toward reducing food waste is to set up automated controls throughout your organization. Not only will automated systems reduce human error, but they can also streamline your operations. These tools can make adjustments and handle your inventory with more care than an entire team of employees. Here are a few opportunities to explore:  

• Temperature or humidity controls protect your delicate products and maintain stable temperatures throughout the day. Some systems can also adjust humidity levels based on what you are trying to store. 
• Quality testing ensures your food meets the U.S. Food and Drug Administration’s standards for safety. This reduces waste by identifying contamination before it spreads.
• Automatic pull systems minimize waste through lean manufacturing, which only pulls the specific products you need. This is more efficient than ordering the same amount each time. You can also use manufacturing software to streamline ingredient sourcing and storage.   
• Minimal stock alerts lower your minimal stock level, and use automated alerts to know when you need to replenish your stored food.

There is no single solution for cutting back on food waste. Instead, you can implement multiple new systems that all contribute to preserving the food you have on-site.     

Use QR codes for data-rich labeling

One of the most powerful tools in inventory management is data-rich labeling, either through QR codes or barcodes. A barcode stores data about a product and reports this information when scanned. A QR code is a more advanced form of the bar code. It can hold significantly more information, which is valuable for brands. 

By investing in a QR code system, you can catalog more information about your food and other items. This makes management easier and allows you to track products on a micro level. 

Actualize first-in, first-out logic 

First-in, first-out (FIFO) logic is essential for moving perishable items. It is the idea that your oldest inventory — the first products you added to your business — should be moved before the newest. This is why many grocery stores have systems in place when they stock perishable products like milk from the back of the store. It pushes the oldest milk to the front so it gets sold. Otherwise, the oldest milk would be stuck in the back forever until it spoiled. 

This is one of the first systems you can implement with your data-rich barcoding system. You can assign dates to your inventory to know when they were produced or arrived in your facility. This empowers you to select the first-in products each time to prevent waste. 

Use an inventory management system

You don’t need to be an expert in operations management to reduce your food waste. Instead, you can invest in a software system to do that for you. Inventory control software, like inFlow, provides clarity into which materials are coming into your business and which products are going out. We designed our software to track SKUs for you and allow you to make adjustments for increased optimization. 

Our software can also help with other aspects of product management. For example, it can keep up with your FIFO best practices so you always move the first-in inventory first. You can also further prevent waste by following buyer trends. inFlow can highlight which products are the least desirable so you can reduce your inventory and focus on higher-demand items. 

Do smart demand forecasting

Forecasting examines past trends to make future predictions. Accurate forecasting uses a mixture of short-term data and long-term trends to identify potential customer needs. For example, year-over-year data can prove that people eat more ice cream during summer. However, quarterly or monthly data can show that raspberry is currently one of the most in-demand flavors. This information would tell an ice cream retailer to increase their inventory, focusing on raspberry options. 

Inventory forecasting reduces waste by predicting increases and decreases in demand. While it isn’t perfect, it can help teams make strategic decisions by looking at various trends. As your inventory software collects more data points — especially through barcoding — your system can get better analytics information, resulting in smarter forecasting. 

Optimize collaboration with suppliers

Another way to optimize shelf life is to work with wholesale suppliers. These companies work with customers of all sizes and can accommodate your inventory needs. As your management systems become more advanced, you can adjust your orders with your vendors to prevent waste. These suppliers can also use wholesale inventory software to optimize distribution on their end.

There is also a place for warehouse management software in your supply chain as well. These tools can optimize storage to maximize shelf life and staffing to ensure products move effectively. All areas of your business operations can benefit from greater insight and management processes. 

Improve staff training and implementation

Good tools can help companies reduce waste but require employees to buy into them. When your employees are knowledgeable and eager to use the tools, they can get the most out of them. Your team can also look for new ways to preserve your inventory and maximize its shelf life. 

Make waste reduction part of your company’s core values. Highlight both the financial cost to your company of wasted food and the environmental impact of lost inventory. Train and retrain your staff as needed. This way, everyone in your company is focused on good inventory management. 

Pursuing continuous improvement

Many of these processes you implement in your organization aren’t one-time improvements. Instead, you will likely continuously work to extend the shelf life of your inventory and optimize your operations. Here are a few ways that you can keep tracking your inventory while looking for new ways to reduce waste:

• Conduct regular audits: Frequently check your inventory and waste levels to see if anything has changed. Identify shifts in your inventory and determine how to address them. 
• Communicate with suppliers: Make sure your suppliers understand your goals and are equally committed to reducing waste. Develop agreements with them that align with your agility goals and lean methods. 
• Encourage employee feedback: The best ideas come from the people working within your organization. Make it possible for your employees to share insights and suggestions for improving the management of your products. 

Most importantly, make sure you have a management software system that you can trust. The right tools will help you find new ways to improve your operations and reach your waste reduction goals.

The post Strategies for Better Product Shelf Life Management appeared first on inFlow Inventory.