6 tips for optimal inventory management

By Nathalie Pouillard

Published: November 16, 2024

Inventory management is strategic for any company in industry or commerce.

It represents the organization of your logistics flow which, if well thought out, can generate substantial savings and a very attractive return on investment.

But it goes far beyond the financial aspect: by optimally managing your inventories and supplies, customer satisfaction is positively impacted.

Discover 6 tips to improve stock management, in store or in the warehouse.

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What is stock management?

Stock management is :

the control of incoming and outgoing flows of goods,
to guarantee the immediate availability of a product when an order is placed, and to meet demand,
without this being too costly for the company, and avoiding as much waste and loss as possible.

The notion of stock can refer to several types of goods:

raw materials or intermediate products, for production industries;
finished goods intended for sale by a retail or e-commerce company.

What are the risks of poor inventory management?

Companies that do not pay sufficient attention to inventory management risk :

poor order management
increased labor requirements,
delays in preparation and delivery times,
poorly organized warehouse space,
sub-optimal use of equipment,
workplace accidents,
loss, spoilage and breakage of goods.

They also run the risk of seeing their market competitiveness decline, to the benefit of better-organized stores or warehouses. The challenge here is to find the right balance between overstocking and understocking by calculating safety stock.

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Clear, simple steps to productivity gains,
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The risks of overstocking

While it may seem like a good idea to plan "broadly" to offset any risk of shortage, overstocking has its share of disadvantages:

it requires larger, and therefore more expensive, storage areas;
because of the quantity to be stored and managed, other additional costs are to be expected in terms of organization (time spent searching for products, labeling, preparing orders, etc.);
finally, there is a risk of stock obsolescence and non-delivery of goods: one reference may be replaced by another, leaving the oldest on the company's hands.

The risks of understocking

Like all extremes, understocking is not beneficial either:

if the manufacture of a product depends on the availability of a part, and that part is not in stock, the whole production chain is interrupted;
and if the item isn't available in store, it's a missed sale, and customer satisfaction and loyalty are at stake.

Here are six tips to ensure that your company optimizes its warehousing and inventory management procedures.

6 tips to improve stock management

These tips concern both warehouses and in-store stock management.

1 - Organize your warehouse or storage area

Make sure your warehouse is organized in a systematic and orderly way so that :

items are easily identified for customer orders ;
materials bound for the warehouse are received and stored efficiently.

The aim is to save time and reduce the costs associated with lost productivity.

☝️ One technique for organizing a warehouse is slotting, which involves determining and adjusting the optimum location of goods in the storage space, to increase productivity in processes such as :

receiving
replenishment
order picking.

2 - Establish good inventory naming and labeling practices

Inventory labelling

Inventory labelling goes hand in hand with its organization: in a large, well-organized warehouse, staff will easily find the right section, while on a smaller scale, a well-labelled store will make it easier to find the right item on the shelf.

Proper labeling of merchandise ensures :

on the one hand, to ensure that each item is clearly identified ;
on the other hand, to provide key information on all its specific features (expiry date, presence of hazardous materials, packaging requirements, etc.).

☝️ When it comes to the documents that accompany the goods, the supplier who sends the product to the warehouse must also follow good inventory practices.

Ideally, the supplier will send items using the same labeling as the delivery warehouses, either coordinating part numbers, or using UPC or UCC codes. This will make inventory work much easier.

Inventory naming

In addition to clear labeling, the naming convention used to identify an item on labels is equally important, not only on labels, but throughout the inventory system.

Unique item identification is obviously very important here. However, in addition to being unique, its length and clarity must also be taken into consideration.

Ideally, item names should be clear and well thought-out beforehand, so that they also have a descriptive function.

The string and/or digits used for the item number (in a well-organized naming system) will have meaning, with each character or set of characters identifying a specific category in your stock organization system.

Secondly, names can be useful when searching for an item during inventory, order fulfillment, or other warehouse-specific tasks, or when filtering or searching for reports.

3 - Define and document replenishment methods

The "calendar" replenishment method

This is the simplest and least customized method. It involves ordering a fixed quantity on a fixed date. It is therefore suitable for inventory and order management with little fluctuation.

Order point management

The order is placed on a variable date, when a certain stock level is reached. The quantity ordered is fixed or variable, depending on the procurement strategy.

Demand Driven MRP, or pull flow, is used when procurement is triggered on the basis of inventory consumption by actual orders, to avoid shortages or overstocking of goods whose consumption may be irregular.

☝️ The application of this method is facilitated by the use of adapted and intelligent software, such as b2wise. This supply chain planning tool, developed around the DDMRP method, enables you to synchronize your supply chain with actual market demand. This enables you to identify the ideal stock level to trigger your replenishment. No more overstocking costs or stock-outs!

How to calculate the reorder point or reorder level? A little reading ⤵️

The replenishment method

This is the opposite: the date is fixed, but the quantity is variable, depending on the number of sales.

This method is best suited to products that are regularly consumed, but are expensive, perishable or bulky.

The replenishment-to-order method

For variable inventory management, subject to seasonality for example, this method consists of replenishing stocks with a variable quantity, at a variable date, according to demand.

☝️ Warehouse performance is enhanced when policies and procedures are well documented. All process documentation must include procedures for :

physical interaction
material handling
safety instructions,
report quality.

Instructions should also include how to handle damaged stock: can it be salvaged, or should it be scrapped?

4 - Use cycle counting

While most companies have processes in place to better manage inventory, this doesn't eliminate the need for cycle counting.

Cycle counting is a method of taking inventory of small subsets of stock over a long period of time. This procedure differs from traditional physical inventory counting, where operations are suspended while all items in the warehouse are counted. It is therefore less disruptive to day-to-day operations.

It also provides a continuous assessment of stock accuracy and procedure execution, and can be adapted to focus on items of higher value, with higher movement volumes, or which are critical to operational processes.

5 - Limit and monitor access to inventory

A simple safeguard for good inventory management is to make sure that the employees who need the figures from the inventories are the only ones with access to the stock and related data.

Because if you know exactly who has access, and can ensure that this small group of employees is properly trained in your company's inventory system and organizational proceduresIt's much easier to manage the system, reduce errors and implement changes when necessary.

6 - Use software for inventory management

These days, technology plays a role in almost every operational process. And if your company continues to track inventory with Excel, you're missing out on a much simpler, more serene and automated way of managing not only stock, but also orders, sales and deliveries.

Download our free delivery note template in Excel format:

The question to ask yourself:

Do you need a simple system that tracks stock levels and movements?
Or a more complex inventory management system that tracks inventory in real time?

Barcode technology plays an important role in any warehouse with an automated system.

Barcode printers and scanners are relatively inexpensive and can be incorporated into warehouse operations.

These significantly reduce manual data entry errors that occur in the warehouse or store.

💡 Sof tware example:

👉 VSEs operating in B2B will appreciate Erplain, the comprehensive B2B inventory and sales management software. With this platform, you centralize and automate all your inventory management, both from a strategic point of view (setting replenishment thresholds, reporting, synchronization with QuickBooks, Shopify and Pennylane, etc.) and at operational level (multiple warehouse management, product traceability, barcode integration, etc.). The result: precious time saved, data updated in real time and optimized processes to avoid overstocking, out-of-stocks or stock errors.

👉SMEs, ETIs and key accounts appreciate the GSE-Web inventory management solution for its ease of use and rich functionality. Among other things, the tool enables you to manage movement orders, reserve products and track spare parts and perishables, and complies with Good Manufacturing Practices through its batch management functionality.

Bonus : the solution follows you wherever you are, thanks to its use on PC, tablet and smartphone!

👉 For large-scale warehouses, a tool like Generix WMS, a Warehouse Management System, not only rationalizes storage space (with slotting in particular) but also automates flows and promotes communication between all players in the supply chain with specific collaborative portals (supplier, carrier, customer portal).