There are several different types of inventory your organization may need to track, including:
- Raw materials
- Unfinished products
- Finished products
- Goods that are in transit
- Maintenance, repair, and operating supplies (MRO) goods
Counting and organizing your inventory and merchandise using an advanced inventory management system helps automate your business management and demand forecasting.
3 Types of Inventory Management Using Technology
Traditionally, warehouse and inventory managers would track their inventories with pen and paper or use computerized spreadsheets to keep tabs on ingoing and outgoing materials and finished goods. Depending on the size of your business and the amount of inventory or merchandise you store and track, those may still be worthwhile tracking methods.
However, those systems are prone to human error and can be time-consuming. Advanced technology has simplified the process of staying on top of what you have on hand and what you need to order in real time.
Three of the most common ways to track your inventory and have visibility into your company’s goods in stock include:
1. Barcode inventory tracking
Barcodes are stickers with graphics, such as a series of black lines on a white background with or without numbers. They contain data about a product. You’ve undoubtedly seen these affixed to the food you purchase at a grocery store. They make scanning the product quick and easy when tracking or selling an item that sends the data to your tracking software.
2. RFID inventory tracking
Radio-frequency identification (RFID) uses smart labels or tags and wireless radio frequencies to identify, track, and transfer information about your products and raw materials using a unique serial number. It involves using fixed or mobile RFID readers that connect wirelessly to your network, which transmits data about your products.
3. Periodic inventory tracking
For financial reporting purposes, periodic inventory tracking involves the physical counting of inventory at specified times, be it monthly or quarterly. Though this methodology may be preferable for small businesses, it is time-consuming, does not involve mobile or digital inventory trackers, and is subject to errors. Nevertheless, it helps a company determine the cost of goods sold.
6 Tips for Maximizing Your Inventory Control
Here are six recommended ways to improve inventory management at your business:
1. Determine minimum inventory levels
It can be tricky to set minimum inventory levels for all the products you sell. But look to your historical sales, inventory data, and delivery times for new stock to arrive for clues to help determine what you need to have at different times of the year to meet demand.
2. Reduce the amount of slow-moving inventory you have
Goods that don’t sell and end up sitting on a shelf in your store or warehouse can cause your storage costs to balloon quickly. Track what’s not selling efficiently and consider marking down the price to move those items and recoup some of your expenses.
3. Utilize inventory management software
Purchase an inventory management system and ensure it merges with your sales and operations planning functions. Also, check to see if it integrates with your existing point-of-sale (POS) system or e-commerce website.
4. Decrease shrinkage
Shrinkage represents goods that are damaged, lost, or possibly stolen (on that note, if you’re concerned about internal theft, include commercial crime insurance in your insurance policy). Double-check to ensure any mistakes made during the receiving process are corrected. Also, be alert to rotating items that are perishable or which may become out-of-date.
5. Know your supply chain
Get a handle on your supply chain functions from when you place new orders for merchandise to when those goods arrive in your warehouse. When receiving new stock, ensure your employees follow a standard process to prevent discrepancies between what you ordered and what’s in stock.
6. Avoid overstocking items
Don’t let market trends influence your inventory decisions; you may end up with products no one wants to buy. Reacting to shifts in consumer buying trends can lead to a glut of inventory that ups your storage costs.
Protecting Your Inventory From Damage and Loss
Whether you store your inventory and merchandise in a warehouse at your business’s property or a third-party location, ensure you have commercial property insurance as part of your overall policy. Commercial property insurance covers the cost to repair or replace your store’s or office’s physical structures, business contents, and inventory and merchandise.
Your policy should also include commercial general liability (CGL) insurance. CGL covers your organization’s third-party bodily injury and property damage risks related to your daily activities. It also may include product liability insurance to protect you from costs associated with damage and loss related to any product you manufacture, distribute, or sell. Product liability coverage can also be added as an endorsement to your overall policy if it’s not automatically included.
Get the comprehensive protection your business needs by filling out an online application for a free quote from Zensurance. Our licensed brokers will shop our partner network of over 50 insurance providers to find the policy that suits you at the best price available. They can also recommend what coverage limits you need and any additional coverages you may require while answering your questions about your policy.
– Reviewed by Matt Daniels, Practice Leader, New Business, Zensurance.