Running on fumes – it’s every entrepreneur’s nightmare. You score a huge sales order only to realize you don’t have enough inventory to fulfill it. Or you’ve sunk cash into products growing stale on warehouse shelves while customers eagerly wait to buy your top sellers.
Inventory missteps can tank even the most promising startups. But with some fundamental inventory management practices in place from day one, you can avoid profit-draining stockouts, write-downs, and inefficiencies.
Read on for key guidelines to keep your startup’s inventory flowing smoothly, all while freeing up resources to fuel strategic growth.
Why Inventory Management Matters To You
As an entrepreneur just getting your startup off the ground, inventory management might seem like less of a priority compared to other things like finding customers or building your product. But keeping close tabs on your inventory can have a huge impact on your success down the road.
Here’s why you’ll want to make it a focus from day one:
1. Prevents Stockouts
Running out of a popular product at the wrong time can spell disaster for a young business like yours. Not only do you miss out on sales and revenue while the product is unavailable, you also risk disappointing loyal customers and losing future business.
Put systems in place to track inventory levels so you can stay well-stocked of your top sellers. Pay extra attention to seasonal items or products with unpredictable demand to avoid getting caught off guard. The last thing you want is customers seeking what they want from a competitor instead.
2. Reduces Storage Costs
Get in the habit of monitoring how long inventory sits before selling, and adjust purchasing levels accordingly. This will ensure you don’t sink funds into products that end up gathering dust on warehouse shelves. The less you overspend on inventory, the more capital you’ll have to fuel future growth.
Also, it may be a great idea to consider initially renting smaller-scale storage while demand is harder to predict. You can then scale up rented capacity as inventory needs to solidify over time. With options such as storage units Tyler TX Hwy 110 or others close to you, you’ll not struggle to find the best fit for your startup.
3. Minimizes Waste
Without careful tracking, it’s easy to overlook slow-selling items or products approaching their expiration date. Before you know it, you’ve got spoiled food or obsolete electronics taking up space.
Set reminder alerts for perishable stock so you can mark down or move out aging inventory while it still holds some value. For non-perishables, analyze sales velocities and trends so you can pare down sluggish items.
4. Enhances Forecasting
As a startup founder, you may feel like you’re operating blind without enough data or past performance to guide future decisions. But setting up inventory management processes can shed light by revealing sales patterns and growth opportunities.
Crunching the numbers on inventory turnover, seasonal fluctuations, and rising or falling demand gives you insights to better anticipate customer needs. Forecasting based on these trends helps prevent over or under-ordering and dials in purchasing to save costs.
Key Steps For Effective Inventory Management
You’ve seen why inventory management matters. Now, here’s an effective way to do it:
1. Identify Your Products
Start by sorting your inventory by major product categories like electronics or apparel. Then get specific with attributes like size, color, material, etc.
Your goal is to create organized groups with similar features, values, and demand profiles. Why? So you can track what sells, and what surplus languishes, and make smarter purchasing decisions based on accurate data, not guesswork.
2. Set Up Systems To See It All
Monitoring your ever-changing inventory requires reliable visibility, regardless of size or scope. While old-school paper logs or Excel work fine initially, consider barcode scanning systems or specialty inventory software down the line.
3. Set Reorder Points
Calculate how long stock takes to deplete based on average sales velocity, factoring in variability too, then set minimums for when to reorder each product. Striking a balance means never shutting sales down from empty shelves, but not overstocking either.
Include transport times from suppliers so new inventory arrives exactly as existing stock nears its buffer minimum. Adapt as faster sales of some items require more frequent resupply to keep up with demand.
4. Build Relationships, Not Just Transactions
See suppliers as partners, not faceless vendors. Fostering mutually beneficial relationships with shared goals reduces risks of unreliable deliveries or materials shortages.
- Meet face-to-face early on to establish trust and transparency.
- Negotiate fair pricing, but avoid haggling suppliers to their breaking point.
- Look for shared values around quality, sustainability, or community benefit in potential partners.
Dependable suppliers who support your success can lend flexibility when issues emerge.
5. Spot Check Your Math
Inventory shrinkage from shoplifting, damage, or warehouse errors drains profits quickly. While stealing headlines, external theft actually pales to insider administrative mistakes or accidental inaccuracy.
Regularly reconcile your inventory accounting records against a full wall-to-wall physical count. Invest time here to confirm your inventory management reports reflect reality.
6. Leverage Technology
Today’s tools make light work of heavy lifting like reminders on reorders, visual dashboards tracking stock levels and sales velocity, and so on.
- Integrations with order management and billing systems keep procurement, inventory, and sales working in harmony.
- Harness the power of data to forecast peaks and valleys in demand.
- Machine learning uncovers precisely when and how much of each item to restock as you scale up.
However, it’s a good idea to implement inventory management fundamentals manually first before pursuing next-gen tech.
Additional Tips For Startups
Here are some extra tips to consider:
1. Start Small and Scale Gradually
As an early-stage startup, it’s tempting to emulate the sophisticated inventory practices of established corporations. But complex tracking and forecasting software requires significant historical sales data to be effective, which you simply won’t have.
Start by manually monitoring a handful of your fastest-moving products. As your experience and sales history grow, phase in more advanced inventory management processes aligned with your pace of growth.
2. Analyze Sales Data
Early on, refrain from guessing which products will sell best or stocking too much variety. Instead, let actual sales guide inventory decisions as patterns emerge.
Replenish top sellers quickly to prevent stock-outs, adjusting upward to meet higher-than-expected demand. For laggards that languish on shelves, scale back inventory for those SKUs to free up cash for winning products.
3. Consider Dropshipping
For starters, skip upfront inventory entirely by fulfilling orders only after they are placed using dropshipping. Capital-light e-commerce brands allow you to focus resources on product design, marketing, and streamlining the customer experience, while partners hold and ship stock to buyers per transaction.
While dropshipping margins can be slimmer, you gain the flexibility to swiftly test new products without sinking cash into speculative inventory that may just collect dust. This reduces the risk of costly write-downs from products customers didn’t end up warming to.
In Closing
Managing every last SKU on day one likely isn’t feasible for resource-strapped entrepreneurs. However, implementing core inventory tracking and planning practices early on provides that foundation to scale.
As customer demand and product lines expand, so too can your inventory processes without major hiccups down the line. With the right inventory discipline, you’ll be poised to handle 10x, 100x, and even 1000x more products effortlessly.