Managing your inventory and your warehouse requires a certain degree of planning. Here are some ideas for managing your inventory effectively.
First, divide your product stocks into separate categories. There are generally three kinds of categories your products can be sorted into.
3 Product Categories:
- The first are the kinds of products you love. They don’t take up much room, and thus don’t cost much to store. At the same time, they are well received and get sold a lot.
- The second kind of product is the kind of product you hate. This product doesn’t get sold often, but it takes up a lot of space and costs you a lot to store.
- The third kind of product is in between: It gets sold often, but it costs a lot to store.
You want to maximise the effectiveness of your inventory management system by placing items from the first product category in the areas that are most accessible. Consequently, the items that don’t get sold often can be put in places that are harder to access.
It’s not just where you place your items, but how much of the product you stock at once. Obviously, you will want to store more quantities from your fast-moving items to ensure your inventory is able to meet the high demand. On the other hand, you can store less products from the second category. This helps to allocate the right amount of product space for your most profitable products.
In fact, you may want to cut out some of the second kind of products entirely from your line. You can use the Pareto Principle to your advantage here: 80 percent of the effects (in this case, your revenue) come from 20 percent of the causes (in this case, the products that take up 20 percent of the storage space, with 20 percent being just an example). You can often cut out the other 80 percent of the causes (in this case, your bulky products that are not in demand) and still receive the same results.
For more guidance on how to drive efficient and more profitable inventory management operations, Contact us today.
