As a small or medium business owner, you’re constantly constrained by your resources. As you grow your business, you have to make hard decisions about what to prioritize and how many eggs you should put in your baskets.
Building out an inventory management system is no different than any other task. You have to look at the problems you’re trying to solve, determine the value you place on those solutions, and then find the system that works for you.
While it’s simple to say, for a small or medium business, this is actually more difficult than it seems. We’ll break it all down, though, and make it as simple and straightforward as possible.
Goals and expectations
Before you dive into the deeper questions, you’ve got figure out if an inventory management system is actually the right solution for your business. This means figuring out exactly what it is you’re hoping to achieve.
For most businesses, this is going to be some combination of reducing costs, increasing sales, or fixing a broken workflow.
Cost reduction comes from spending less time managing the process of moving inventory about, finding existing inventory, and checking inventory for accuracy. This is the basis of almost any inventory management software. It tells you how many things you’ve got.
Revenue increases come off the back of knowing where things are. Head into your local Big Box Bookstore – there are still a few – and ask for an unpopular title. Those things are not easy to find. Even with a good system in place, finding individual items can be a nightmare. An inventory management system will help your business keep track of the things that people want to give you money for.
As for workflows, an inventory system can help you make your whole business run more smoothly. You can be done with unpacked boxes, sporadic inventory taking, and pulling half of your staff off their normal routines to try and hunt a widget down in the middle of the day.
Each of these goals will use the basic inventory management system, but your particular needs will help you determine the perfect system for you.
Create an inventory structure
Every inventory is slightly different. Going back to our bookstore, we’re going to use books as the base unit, shelves as our small storage location, and maybe rooms as a larger definition.
This step breaks down into two separate pieces. First, you have to determine what kind of items you’re tracking, how they’re organized, and what information you need to track about the items themselves. Second, you need to figure out how those items are going to be stored and organized.
You might be tracking parts for a plumbing business, which would require you to track small items that come in packs and larger items that are singular. You might have ten trucks and a main office for storage locations or have one truck and a series of bins that you pull from.
Businesses and items usually have an intuitive structure for inventory management, and there’s no reason to deviate from that system. The important thing to do at this point is to understand how all the pieces fit together and to get them all mapped out.
Finally, you should think about any extra data that you may want to store if you’re planning to adopt some sort of software solution. Thinking back to the bookstore again, this metadata could include details on versions, covers, or formats – in reality, this is all captured in an ISBN or EAN code, but it could be done another way.
Plan a labeling system
Having everything all in one place is no good if you can’t easily track the things as they move in and out. A barcoding or QR coding system can help you keep everything ticking over.
Depending on the inventory master plan that you determined earlier on, you’ll have a specific system for managing what inventory you get. A plumber might have packs of items with preprinted barcodes on them, for instance, but a retailer may need to print their own codes.
Either way, you’re going to need some sort of scanner and it wouldn’t hurt to have a printing system in place. I’ve covered bar and QR codes before, so you can jump over and read about the benefits and costs associated with those systems.
Pick an inventory management software
A good plan, barcodes, and a nice layout are all for nothing if you can’t manage the system on a day-to-day basis. Inventory management software can help you get all the piece into place and running smoothly.
These systems integrate with your barcoding software, accounting software, and even shipping software if you use it. That allows you to keep a close eye on how pieces are moving around the business and what those items are costing or making you.
We’ve already got a list of free inventory management software options if you want to start out with the basics. Some of these systems are great for small businesses with few users and not too much stock. Others can manage huge operations if you’ve got the IT support to help them flourish.
Beyond those freebies, Capterra also has a full listing of inventory management systems with reviews, features, and user ratings.
Building your implementation plan
Nothing good ever comes together by accident – unless you count Reese’s Peanut Butter Cups. To make sure all the work you’ve done to this point can be put in place correctly, you’re going to need to sit down with everyone who’s going to be affected and get their input.
Shipping, receiving, stocking, the guys who put things on the truck, the people who count up the finances at the end of the month, and maybe your cousin Lou. Everyone who’s going to run into the new system – or at least a representative from their department – should be involved.
This does two things, first, it gives you information about workflows and daily use that you may not have known. These are the folks who use the inventory every day, and they’ll have a slightly different insight on how it’s going to be practically used.
Second, it helps you get buy-in from the rest of your team. A change like this is going to take time and resources, and if you have a whole bunch of employees who don’t think their voices were heard, they’re not going to jump on board with you.
After you’ve got that buy-in, you can develop the final details, like a timeline for implementation and training. Please, please, please don’t skip training. To make this work, you need people to understand the system. Training takes time and money, so plan accordingly.
Final thoughts on inventory management
Getting your inventory under wraps can make a world of difference to a growing business. If you don’t have a system in place already, you should make this the year that you finally get organized.
With this checklist, you can have a strong foundation in place for your brand new inventory management system. If you’re looking for software, remember to check out Capterra’s inventory management software listings. For more logistics tips and trends, swing by the Capterra Logistics blog.
Looking for Logistics software? Check out Capterra's list of the best Logistics software solutions.