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Inventory Management Methods To Cure Your Business Growing Pains

Nobody knew more about business growing pains than Paul Huffaker, Vice President of Racesource Inc., a company that customizes vehicle components for the racing industry, particularly for the monster truck teams of Grave Digger and El Toro Loco. Just as Grave Digger and El Toro Loco are famous in the monster truck racing industry, Racesource is known for high quality vehicle parts and components. As Racesource grew, so did its issues with inventory. The company’s inventory outgrew its inventory tracking system—an Excel spreadsheet. And Huffaker quickly discovered their assemblies couldn’t be tracked in a spreadsheet. Each assembly was made up of multiple items that can be used separately or brought together to create one item or asset. That’s when he decided it was time for a change. “Maintaining an accurate inventory count on Excel was time consuming and error ridden,” Huffaker said. “Often I would reorder or manufacture parts I already had simply because I didn’t know I had them, which was an unnecessary cost. And with many smaller items being combined into an assembly, I needed a system that could use the existing UPC codes to track the individual item as well as the assembly.” Like Racesource, perhaps your company’s operations—not to mention your employees—have been stretched to the limits. Poor organization and high rates of human error have negatively impacted how business is done. And unfortunately these bad business habits eventually trickle down to your customers. Implementing a barcode inventory management system can help you get back on track and significantly alleviate the pains of a fast-growing business. Growth is good, especially with the guidance of accurate, real-time data you’ll collect. You can go even deeper with these techniques to help optimize and gain control of your stock once again. 1. First-in-first-out (FIFO): This principle is simple, yet absolutely essential, especially in dealing with perishable items. As a retailer, it’s not wise to always use the newest stock to fill orders. When old inventory sits on warehouse shelves, its susceptible to damage, rotting or expiration. Why not make a rule to store new inventory at the back of shelves and then take from the front, which automatically enforces a FIFO system. End-of-year counts can get done faster with FIFO as well, since it’s a good method for calculating inventory value. 2. ABC Analysis You could say prioritizing your stock and organizing your warehouse is “as easy as ABC” when you divide all your in-stock items into three groups: A, B, and C:

• A Items: high value/low sales frequency.
• B Items: moderate value/moderate sales frequency.
• C Items: low value/high sales frequency.

One thing to keep in mind with this system: you will likely keep a relatively low number of “A” items in stock, and mistakes in inventory counts could mean big problems. These items definitely need closer attention than “C” items. To implement this system in your warehouse, store “C” items closer to the packing area, since they are the most popular, and work your way back to the “A” items. 3. Optimal location labelling A messy, disorganized warehouse can keep you up at night and turn the working environment into a complete nightmare. Your team should be able to look at your system easily find products when needed. And once you execute the “ABC” system, it’s essential to label each area and /or shelving unit. Don’t use fancy names or make it unnecessarily complicated; in this case, keep it simple. This makes it easy for current employees to initially learn and then train new recruits. 4. Stock reviews Even with all the best inventory methods in place, errors are bound to happen. So, do what you can to keep mistakes to a minimum and make stock reviews less painful for you and everyone else involved. For example, don’t do a huge end-of-year count. Instead, spread your counts throughout the year. Here are a couple of ways to more efficiently accomplish this:

• Cycle counting. Each week, assign team members counting tasks of a smaller number of items each week. Over the course of a year, each product should then be counted and verified a number of times.
• Spot checking. You don’t have to spot check on any regular schedule. A spot check might be called for if a certain product is problematic for some reason or if a team member has some extra time and is looking for something to do. Spot checks simply add another layer of accuracy to your operations

Each of these inventory methods brings new effectiveness and efficiency to your warehouse as a whole. However, adding an inventory management system makes each task less intimidating and more effortless. When your team can perform inventory counts with barcode scanners or even smartphone apps, the rate of discrepancies diminish and productivity increases. Racesource’s Paul Huffaker can vouch for that, saying they saw immediate results after one day of use. An inventory management system enabled them to not only clearly label all inventory, improving their billing, manufacturing, and reordering processes, but also decreased unnecessary expenditures by $8000 and improved its team’s work efficiency by 52 hours annually.