Accurate Inventory Tracking Methods & Tips For Any Business
Whether a business is just starting out or rapidly growing, inventory tracking systems can help increase stock accuracy and employee accountability. In fact, a GS1 US Survey shows that using an inventory tracker, such as radio-frequency identification (RFID) to manage stock, had the potential to increase inventory accuracy to 95%.
Inventory tracking is a process that usually requires management systems to efficiently monitor stock levels in real-time. The implementation of automated software allows for perpetual tracking of items without the need for daily, manual stocktakes, simplifying inventory management for businesses that may have stock in multiple locations, bulk shipments, and simultaneous transactions.
When implemented successfully, inventory tracking will increase staff accountability, reduce stock shrinkage, and prevent under and overstocking of products. In this article, we'll discuss the methods and best practices of stock tracking procedures.
The Effect of Inventory Loss
As beneficial as efficient stock management is to a company, stocktake discrepancies will have an equal, but negative effect. Missing inventory should not be taken lightly, as it can lead to lost profits and increased inventory costs.
Item shrinkage can occur for reasons, such as-
- Internal/External Theft
- Misplaced stock
- Mislabeled stock
- Expired goods
- Damaged products
- Supplier errors
Similarly, in 1999, U.S.-based chocolate manufacturer, The Hershey Company, failed to produce over $100 million worth of Kisses and Jolly Ranchers to stores in time for Halloween. As a result, Hersey's profits not only dropped by 19% but its stock decreased by 8%, as well. This mishap was a direct result of a poorly managed supply chain system and exemplifies the financial consequences of failing to accurately track inventory.
Ultimately, effective inventory management systems will save businesses time, resources, and capital by informing management of how much stock they have on hand and how much they need to order.
Additionally, knowing the customers' spending habits and ordering supplies accordingly creates a healthy supply-and-demand balance that encourages business growth. By appropriately meeting consumer demand without delays, businesses can enjoy greater customer success and a boost in profits.
Online employee scheduling software that makes shift planning effortless.
Try it free for 14 days.
Importance of Proper Storage
Inventory control is not only pertinent to the front of the store where good consumption takes place; it also informs a business of how they should manage and store their products.
Minimize storage costs
Business is not simply a give and take of goods, storage can cost a pretty penny, and sometimes it is unnecessary. The Industrial Distribution estimated that businesses usually pay up to 30% more in storage costs than the stock's actual value. Large companies with established, loyal clients and customers may need warehouses to store their inventory and can afford to do so. However, smaller businesses could save money by keeping their inventory on-hand instead.
For businesses that handle perishable goods, such as restaurants and cafes, proper stock ordering and storage are critical because improper management of goods can lead to loss of profit. Perishable food loss in American businesses equaled $43 billion in 2013 alone.
However, businesses can implement effective inventory management and storage techniques to help reduce this number by alerting the team when items are stored in improper conditions. Whether it's the refrigerator, freezer, or shelf, keeping similar items in their respective storage units can help businesses reduce spoilage.
Avoid dead stock
Dead stock is a term referring to inventory that cannot be sold because it has either expired or become irrelevant due to the release of a newer model. If a product's stock quantity outweighs the consumers' demands it can create dead stock and increase holding costs, such as warehousing fees.
Inventory Tracking Tips
A business has to understand its needs in order to identify the necessary inventory tracking program to implement. The most efficient and helpful tool a business can use is inventory tracking software.
Here are a few tips for businesses looking to effectively track stock by utilizing software tools-
1. Monitor sales quantity
An effective tracking method is analyzing customer demand and sales forecasting. This information can then be used to sort inventory based on sales, especially during peak seasons, by placing popular items on the top of the list and making them easier to see when replenishing stock.
Software makes this very simple with its ability to track stock in real-time and produce various reports. Automated inventory tools can show stock and variance levels, making the calculation of sales, profit, taxes, fees, and stock quantity instant.
2. Utilize barcode scanning
Larger amounts of inventory call for a more extensive inventory management solution. Excel can be used solely when there are only one or two workers inputting and editing data for a small amount of inventory. However, inventory software is necessary when handling a larger number of products because its ability to integrate with scanners and POS systems to perpetually track stock makes it incomparable to manual tracking.
When there are larger amounts of stock to be accounted for and several staff members entering data, it can lead to confusion and increased human errors. To prevent this, barcode systems can be integrated with inventory management software so scanned items will input automatically into the program.
3. Generate reports
One of the most useful features pertaining to automated software is its ability to automatically generate inventory tracker reports. The user simply chooses whether they want a report on a daily, weekly, monthly, quarterly, or yearly basis. With these reports, companies can create comprehensive charts that display various inventory levels. Data like this makes it easy for warehouse managers to decide what orders are necessary.
4. Monitor running itemized totals
Excels single inventory pages can sometimes meet all the needs of small businesses that only handle small amounts of stock as it rates, organizes, and tracks inventory on a single spreadsheet. However, larger companies with greater quantities would find running inventory totals more helpful. Running totals on software is easy and can be programmed to display profits, sales, and product inventory that are updated either by shift or daily.
Barcoding- SKU vs. UPC
Effective inventory labeling can simplify tracking processes while reducing the risk of human errors by limiting product confusion. SKU and UPC are two of the most common ways businesses label their inventory by assigning numbers and barcodes to each item, allowing their inventory management software to take care of the rest.
Online employee scheduling software that makes shift planning effortless.
Try it free for 14 days.
Stock keeping units are inventory codes that are unique to not only each item but to the store it belongs to because each company assigns the codes themselves. SKU codes contain both letters and numbers and can label not only physical goods but also services and other billable goods within a company. Places that commonly use SKUs include-
- Fulfillment centers
- E-commerce sites
While SKUs are very informative as they can include information on a product's color, cost, size, location, and origin, the codes can easily become too long and confusing. On the other hand, if a business makes a code that is too short, it could be confused with the product's quantity code. To avoid these issues, businesses can consider some best practices used by large companies.
1. Start codes with a letter - Codes have better readability when they begin with a letter as numbers such as 0 or 1 are often misread. Starting an SKU code with a zero can not only confuse readers but also the computer the information is inputted in.
2. Use both letters and numbers - The beauty of SKUs is that you can use letters and numbers to describe products colors, sizes, costs, etc., allowing employees to easily identify products.
3. Keep codes between 8-12 Characters - Codes that are too short can be misinterpreted as quantity codes, while long codes have low readability and cause confusion.
4. Avoid using the manufacturers SKU - While this may seem like a good option for re-ordering products, it can lead to confusion when re-selling products or a business switches their manufacturer of choice.
Universal product codes assign each good a 12-digit code that remains constant no matter what store the product is shipped to. These codes are produced by GS1, formally known as the Uniform Code Council, and are attached to the barcodes scanned at grocery stores.
For example, a brand of cereal may have hundreds of thousands of stores that carry their products. However, no matter where a customer purchases this cereal, the 12- digit UPC code will remain the same.
Businesses that use UPC include-
- Grocery stores
- Domestic Retailers
- International retailers
So which is better, SKU or UPC?
The answer to this question depends on the specific business and their needs. Major businesses like chain grocery stores and retailers use UPCs because they are universal. However, the benefit of utilizing SKUs is that it can be designed to fit the specific needs of the business based on the products' description.
SKUs aren't limited to just numbers; their alphanumerical codes can stand as a description for the product based on the unique business that holds them. Another benefit of using SKUs is business exposure because when a product's SKU code is searched online, the business that assigned the code pops up alongside the brand.
Manual Inventory Tracking
While many small businesses utilize a point-of-sale system (POS) to keep track of their sales and inventory, 46% of growing businesses either use manual inventory solutions or simply don't keep track of inventory data.
Regardless of the size of a business, inventory reports are crucial and can help companies grow by displaying inventory turnover ratios, variance rates, and demand forecasts. With this information, management can identify which products are popular and which can be consolidated, or completely eliminated.
Here are some options when it comes to manual inventory management techniques-
Pen and Paper- Even if it is just a pad of paper and a pen, a business needs to make a list of all of the products they offer and the raw materials needed for products made in-house, and update it daily based on sales quantity.
Spreadsheets- Whether it is a physical or digital spreadsheet, these documents can make manual
inventory tracking more organized.
These options are almost obsolete and oftentimes riddled with human errors, making manual methods inefficient. A study from PeopleVox actually showed that the number one issue in 46% of warehouses was caused by human error. Something as simple as a miscalculation, missing a routine inventory check, or recording sales can lead to a significant loss of capital. These situations can be avoided by implementing stock tracking software.
Benefits of Automated Software
Inventory tracking software is the most effective inventory management option due to its reliable, real-time tracking abilities. Benefits of automated inventory software include-
1. Decreases human error- Inputting data manually can lead to mistakes, while automated software is easily integrated with already established POS systems, allowing access to live inventory, transaction, and barcoding data. Software eliminates the possibilities of miscalculations, miscounting, and general confusion when multiple people are trying to update records. Employee accountability will also increase, as software can track the inventory each staff member handles.
2. Saves time- When there is a busy day, management should not be worried about sacrificing customer satisfaction by having to stop their service to update stock records. Tracking software does this automatically, allowing employees to focus on customers' needs.
3. Increases scalability- As a business grows, the option to use manual tracking systems shrinks due to the overwhelming amount of stock they must manage. Software easily tracks exponential amounts of incoming and outgoing stock without the stress of unorganized chaos. Automated systems have the ability to grow with a business that manual tracking just cannot offer.
4. Constantly keeps inventory data up to date- Stock management software is compatible with POS systems and barcode scanning. Therefore, when a barcode is scanned during cycle checks or at checkout, the automated system records it and updates the stock quantities accordingly. This eliminates the need for end of day tallies and manual calculations.
5. Prevents under/overstocking- Overstocking of products can lead to spoiled goods, while understocking can result in missed business opportunities. Implementing inventory software prevents these mishaps by alerting management when stock is depleting.
Inventory tracking is essential for businesses of all sizes to grow and maintain customer satisfaction. With proper inventory management programs, businesses will experience lower inventory discrepancies, higher profit margins, and a more efficient demand fulfillment system.
- 8 Proven Ways For Efficient Product Sourcing
- How to Calculate Inventory Variance in 3 Simple Steps
- SKU Rationalization- Maximize Profits By Stocking Less
- The Pros and Cons of Inventory Storage Methods
- Inventory Report- What Is It and How Often Do You Need One?
- What is the Ideal Inventory Turnover Ratio For a Company?
- Why Choose a Barcode Inventory System? And How to Get Started
- Accurate Inventory Tracking Methods & Tips For Any Business