Recently, I ordered a combination stroller and car seat from a major retailer. This retailer has storefronts, of course, but also a website from which items can be ordered. I chose to order through the website and have the item shipped directly to the recipient of my gift. Several days later, I received a call from the recipient. She had received a patio furniture set, not the stroller combo that I had ordered. What had happened? Obviously, there had been some breakdown in the inventory management process that caused an individual to pull the wrong product and ship it out to my friend. Getting this corrected involved a major hassle, and it is unlikely that I will use this website again to place orders.

Just what is inventory management? If you are a business that sells physical products, inventory management relates to all of the decisions you make about your inventory – how is it ordered; how is it stored; how it is accessed based upon customer orders; and how is it shipped to customers.

Who Needs to Manage a Centralized Inventory?

Basically, every business, but it is particularly important for e-commerce businesses that receive online orders and then must fill those orders physically from a “hub.”

If you hold all of your inventory in a single hub, then you have a “centralized inventory.” Now large companies may have several “hubs” (think Amazon), but if you are a small business you will most likely have a single hub. And if you offer multiple products, you need to have a system in place that allows rapid access to specific products, so that they are shipped out to customers accurately, quickly, and efficiently.

Centralized inventory management is even more important if you have a website and a physical storefront and are filling orders from both channels. The concept is this: customers, no matter what channel they use to make purchases, must have confidence that you will deliver their purchases to them as quickly as possible and that the products they receive are actually what they ordered.

Here’s How You Do It

  1. You have a physical inventory hub for all of your products. All items are stored somewhere in that hub. You need to give each “somewhere” a clearly identifying name, and that should be in the form of large signage. This allows workers to find the right item quickly, and, as inventory is re-stocked, provides the identifying traits for placing that inventory in the right places. Every location for a specific product must have a unique identifying name. Even if you have an open aisle with no product, you must label it so that there is never a misunderstanding.
  2. If you have shelves in those aisles, then obviously each shelf must be labeled correctly with arrows pointing up or down to signify where the specific item is.
  3. All items must have clear descriptions that make them unique. Without unique descriptions, it is also difficult to locate items on inventory reports or to find them in your system.
  4. Consider assigning item numbers. These can identify specific items on shelves, as well as in your control system. Thus, when you are filling orders, searching or filtering reports, item numbers are the most efficient of extracting and viewing the inventory data you need. Instead of entering item descriptions that can be hundreds of characters in length, you have a master list by item number and using your inventory software just becomes that much easier.
  5. Record units of measure. You may have items that come 4, 8 or 12 to a box. These are easily assigned through your item number system. Thus item 201 is a box of 4 purple glasses; item 202 is a box of 8; and item 203 is a box of 12. If you have items that are differentiated by weight, you can do the same thing.
  6. Get the right software. There are a large number of inventory software vendors/products. You need to explore the options and make sure that the software you select is right for your current business size, but also is one that will scale with you as your business grows. Nevertheless, the first time you load your inventory into a software program, your job will be much easier if you have all of the locations, labels, and descriptions in place, and you have an organized numbering system for every item you store. The additional benefit of this initial loading is that you get an accurate count of exactly what you have on hand right now.
  7. Create the Policies and Train Your People. Those employees who work with your inventory at the hub and those employees who are responsible for taking orders and entering fulfillment, shipment and the on-going inventory count are the people who must receive very careful and thorough training regarding the labeling and numbering system, as well as the addition and subtraction of items as they come in or go out.

One Final Recommendation – Get it in Writing

It is a good idea to have all policies and procedures for inventory in writing, and not just for current employees. If you do not have someone who is highly skilled in organizing and developing such a manual, then consider contracting out with a business writing service that has experience in developing employee manuals. Every time a new hire comes in, that manual will ensure that nothing is left unexplained. A big part of inventory management is a consistency of everyone who has access to your software and its uses.

Author: Nelma Lumme is originally from Finland. After her graduation from the School of Humanities and Social Sciences at the University of Tampere, she moved to Chicago, IL where she is starting a new career as a freelance blogger, writing mostly about education, self-improvement, and academic works of psychology for writingdaddy.com. You can follow @NelmaLumme on Twitter or Facebook.

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