In our last post we have discussed about Inventory Management and its importance for the retail businesses. Today we will brush up with the techniques followed by ace businesses in managing their inventory.
- Par level: Par Level is the term used to denote the minimum amount of certain product to be present in the inventory at any point of time, as such businesses can avoid the situation of out of stock or unavailability for that product. Once the quantity goes below the par level, businesses make order of fresh stock. Businesses set par level mark for individual products depending on the parameters of sale, value, season, etc.
- First-In First-Out: Often abbreviated as FIFO, it is a technique where the oldest brought in product (first coming into the inventory) goes out first (first goes out of the inventory). This helps in eliminating spoilage and dead stock. To maintain this it is essential to make a system where nwest stock are always placed from the back.
- Contingency planning: Very much an applicable point for almost all aspects of businesses, contingency planning in inventory management helps you prevent situations like high-value products sitting for longer period constricting cash flow, out of stock with seasonal products with higher sale, dead stock, constricting storage space with slow-selling products.
- Regular Audit: Regular audit is done generally in three ways, physical inventory, spot checking
andcycle counting. As per convenience and requirement, businesses can apply all, one or a combination of these three ways. Physical inventory is the process of checking the entire inventory at once. Generallythis is done at the end of the year or after a set long time interval as it is a laborious task to take up often. Spot Checking is a method of checking the stock and inventory of certain product(s) all of a sudden. Generallythere is no pre-set time and day for this exercise. Cycle counting is the process where items are counted in cyclethroughout the year.
- Dropshipping: This is the method where businesses
doesn’thold physical stock of the items. The items are stocked and managed by suppliers. When a business receives an order to be shipped, they inform the supplier and the item is packageand given into shipment directly from the suppliers’ warehouse. This technique is very popular among the onlinebusiness.
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