When it comes to inventory, there are many common errors that small business owners learn to correct for over the course of their careers. Luckily, you don’t have to make the same mistakes that they did, and still learn from them. There are a number of recommended tips from industry leaders when it comes to inventory, and all of them help structure business practices in an effective, productive, and efficient manner. Before reading forward, though, it’s important to remember that mistakes are a natural part of learning and growth for any system, whether it’s biological or completely manufactured. Companies are a unique mix of static, lifeless structure and dynamic human components. The successful business model accommodates the strengths and weaknesses of both sides of this duality. More practically, this means that a successful business plan needs to accommodate for errors during the implementation process, and include constant monitoring so that people can react to real-world situations and modify the behavior of whatever process implementation has begun.
Minimize Compounded Safety Stock
According to All Business, monitoring the automated safety processes that most manufacturers and business owners have in place to ensure that no waste occurs when many different companies in a single supply chain start applying the same principles is important to avoid confusion and errors. Safety stock is the industry term for inventory backup, which aids businesses in case there is sudden, unexpected demand increase. It’s important to have access to about 5 to 10 percent of inventory for times like these, when customers would otherwise be kept waiting and possibly be turned away, even though they have money in hand.
However, when many companies in a supply chain employ this tactic, the stock gets compounded, so the business may actually have access to a much higher percentage. This is unnecessary, but it affects the bottom line because that extra inventory takes up money and other resources, such as storage space. Thus, the cost compounds through the chain, and the business owner often pays. Careful monitoring of the system will prevent this from taking place.
Take Inventory on a Weekly Basis
According to the Georgia Restaurant Association, a successful business involves a weekly inventory analysis. This will allow the business to keep up with market trends, adjusting supply orders accordingly. Furthermore, weekly inventory is necessary to identify wasteful practices before they snowball into a major financial burden. Maximizing profit is about more than just selling goods, it’s about minimizing cost and ensuring maximum efficiency throughout the full spectrum of business practice. Diligence in a weekly checkup is one important component of this system.