Keeping up-to-date inventory records is sometimes thought of as a mundane and unimportant task. Such is always the case until a company does its quarterly counts. That’s when they realize that half of their merchandise has more or less just walked off – completely gone and unaccounted for.
Because of this massive amount of invisible shrinkage, I like for my company to do inventory management every single month. By doing so, I am able to know exactly what my warehouse in Connecticut contains while taking care of business in my New York City office. Monthly inventory management tasks are how I maintain a clear understanding of what is already stocked versus what needs to be reordered.
Exploring the 3 Types of Inventory Management
In most cases, there are three main types of inventory to manage: raw materials, finished products, and supplies. The first type is the management of the raw materials inventory, which includes all the items needed to complete each product. For my company especially, there are numerous raw material items that are required to finish one handbag, so keeping my inventory in check is a must.
My company needs to keep track of its inventory of hardware including counting my stock of raw materials such as meters of chain, eyelets, magnets, zipper pulls, square feet of leather, and so on. These are routine items we check the inventory of before and after every single production run. By knowing these quantities we know what to order for our next production run, what is running low and what we have an abundance of.
Furthermore, we like to get an accurate estimate of how much material we will need for a production run because we don’t believe in excessive waste. For example, we find that leather becomes somewhat difficult to measure for the purposes of inventory management and/or restocking. This is due to the fact that, when cutting leather to make handbags, there is always extra material left over that cannot be used because of the holes in it or unfinished edging on the cowhide. After a cutting die is laid on the leather accordingly and cut there is minimal unused leather that cannot really be accounted for because it is scrapped. This changes the overall count of square feet of leather so after a production run, we recount all the leather so we have a clear idea what we can use for future production runs.
The second type of inventory management that is of your finished goods, which is self-explanatory. This gives my company an idea as to what we have available in stock for sale. Some items sell faster than others, staying on top of the finished product inventory is a must in order to know what to restock next production run. Black is always our best seller so we always try to have that stocked in our warehouse and on our website.
Once productions runs are complete, the inventory is counted at the factory and then shipped to the warehouse to be counted again. We want to make sure every single bag and accessory is accounted for. We sort out all the bags by SKU, then by style, then by color. Doing this type of organization makes it much easier for our warehouse to find the right bags when they are sold and need to be shipped out.
We also count after events to make sure nothing was lost in transit. We want to have an accurate account of what was sold, especially when we partake in flash sales because we don’t want to sell a product that is out of stock. We have to keep a tight watch over inventory management for online as well because we are not just selling on our own online store, we are also sold on various e-commerce stores that we have to keep inventory updated on their platforms too.
The third, final, and equally important type is the management of your supplies inventory. In the midst of everything, we also have to account for boxes, dust bags, tissue papers, hang tags, look books, postcards, stickers, and all materials for shipping out the finished product. This type of inventory management might seem unimportant to some, but just wait until you do a production run and you don’t have everything you need. Delaying the shipping date is a no-no; you always want to have your products available for shipment to your loyal customers. Comprehensive inventory management makes this possible.
The Final Verdict
My inventory management team counts monthly, as well as at the end of the year, to make sure all products, raw materials, and supplies are accounted for. Especially after the holidays when various sales and events take place, we like to know what we have left to sell for the New Year. All of our small accessories such as key chains and puffs are in our New York City office, and that inventory has to be counted as well.
As you can surmise, overseeing the flow of units in and out of the inventory is no easy feat. No wonder there are software systems such as Quick Books, Biz Slate, 3PL Warehouse Manager, and NetSuite to make things easier. These systems can pull information from your SKUs and/or barcodes and help you keep your company properly supplied.
In the end, inventory management is an extremely important aspect of running any company, especially one that needs to keep updated and accurate records. Knowing what you have in the company’s inventory at all times helps you stay ready to ship products to your valued customers, which in turn allows you to focus more of your attention on important aspects of running the business.