For the month of September, the Entrepreneur Weekly is covering the topics of Distribution and Consumer Management. Our previous installment addressed consumer loyalty, and this week we are zooming in on the actual products that entrepreneurs use to carry out their business as we explore inventory management. Inventory management refers to the process of ordering, storing, using, and selling a company’s resources. This includes the management of raw materials, components, and finished products, as well as warehousing and processing of such items.
According to Investopedia, “A company’s inventory is one of its most valuable assets. In retail, manufacturing, food services, and other inventory-intensive sectors, a company’s inputs and finished products are the core of its business. A shortage of inventory when and where it’s needed can be extremely detrimental.” Therefore, skills in managing and accounting for the use of your inventory is something that cannot be understated.
Inventory Management VS Supply Chain Management
The terms supply chain management and inventory management are often thought to be the same concepts but there is a key distinction between them. According to Forbes, “Supply chain management oversees the flow of products from raw goods and production sourcing through final distribution. Inventory management deals with receiving, tracking and storing the products you hold, plus provides data for informed purchasing.”
In a Forbes Advisor article titled How to Manage Inventory Effectively 2022 Guide, it was said that “For a small business or solopreneur, supply chain and inventory management procedures easily meld together. However, it’s important to know the distinctions as you grow and begin delegating supply chain and inventory tasks to staff or outside contractors.”
Types of Inventory Management Techniques
There are various types of inventory management techniques, and entrepreneurs can employ more than of these techniques as they find the one that works best for them and their business. There are quite a few techniques but here are 5 common ones that businesses can use:
- Just-in-time (JIT) Inventory – This is an inventory management method in which you keep as little inventory on hand as possible.
- ABC Inventory Analysis – This is an inventory management technique that determines the value of inventory items based on their importance to the business.
- Bulk Shipments – This method assumes that bulk buying works out cheaper and this works well for businesses that are sure their products will sell. However, this technique poses an issue when there is a sudden change demand.
- Backordering – This technique is when a customer places an order for stock that is not yet available. Learn more about how backordering impacts inventory control.
- Consignment – This technique allows a consignor, usually a wholesaler, to give their goods to a consignee, usually a retailer, without the consignee paying for the goods up front. The consignor still owns the goods, and the consignee pays for the goods only when they actually sell.
There are different types of techniques that can be used to manage your inventory but based on the services your business provides you will have to consider what works best for you.
In this age of technology, we are gifted with resources that make our life and business operations easier. There are many tools on the market that can help with inventory management for small, medium or large businesses and these are also cost-effective and some are even free. Entrepreneurs can look into tools such as Square POS, Ordoro, Shopify POS, Clover, Lightspeed and monday.com
JBDC Virtual Biz Zone Webinar
The Jamaica Business Development Corporation (JBDC) is particularly interested in the development of small businesses and hosts webinars that help to inform and assist entrepreneurs across the island. Distribution and Customer Management will be the focus of the JBDC Virtual Biz Zone webinars scheduled for September 2022.
The first session takes place on September 13, 2022 under the theme, Building Customer Loyalty. Continuing with the theme of Consumer and Distribution Management on September 20, 2022 JBDC Virtual Biz Zone will tackle the theme: Inventory Management Techniques for Small Businesses with JBDC’s Inventory Manager, Mr. Haron Spencer. All sessions take place at 10:00am on Zoom. Visit www.jbdc.net for registration details.