Wholesale Inventory Management: Tips and Tools To Tame Your Stock
Wholesale inventory management can be complex. It can be your company’s best friend or biggest downfall.
When you do it right, you’re setting yourself up for consistent business growth. But when you’re unorganized or under-optimized, it can be a downright disaster.
That’s why this article is loaded with inventory management tips and top inventory management techniques – to help make sure that your business is in the “growth” category instead of “disaster.”
We’re going to look at what inventory management is and why it’s so important, some tips to make sure your wholesale inventory system is fully optimized, and some of the best tech you can use to streamline the process.
- What Is Inventory Management and Why Is It Important?
- Six Tips for Smooth Inventory Management
- What Is the Best Software for Inventory Management?
- Finding Your Ideal Inventory Management Process
What Is Inventory Management and Why Is It Important?
Wholesale inventory management is the system you use to get, store, sell, and deliver products to your customers. As you can tell, there are a lot of moving parts at work, and they’re all important for smooth and streamlined operations.
The best wholesale inventory management systems are reliably accurate in their predictions of the store’s demand. When you can predict which items customers will buy and when, you’re able to match your inventory count.
This means that you won’t have an excess of inventory that ends up losing value or going to waste. You also won’t have too little inventory, causing you to run out of stock and lose customers to your competitors.
It’s possible to make these predictions with good ol’ fashioned math calculations and Excel spreadsheets. But there’s a much easier way to do it: technology platforms and tools.
Now that you understand the basics of wholesale inventory management, let’s look at some tips you can implement in your business for smooth sailing.
Six Tips for Smooth Inventory Management
1. Try to Avoid Manual Spreadsheet Tracking
This is a contentious topic in the wholesale world. Back in the old days, keeping an Excel spreadsheet (or physical documents!) was the most popular wholesale inventory system.
Manual techniques will work, but only for a short time. You’ll find that as your store grows, manual inventory management will become harder and harder… to the point where it becomes impossible to keep up.
That’s why it’s best to avoid manual tracking altogether and go straight for software when you’re starting out. Of course, this might be tough for budget or other reasons.
If you’re in this boat, pick one of these two recommendations:
- Start with manual tracking, but set a hard transition point for when you’ll switch to wholesale inventory software. For example, when you make $10,000 in revenue, you might be more comfortable reinvesting some of it into good software. Just make sure you set a goal and stick to it, or you might be tempted to wait too long – at which point your manual tracking can get really messy.
- Find “freemium” or tiered level wholesale inventory software and start with it right off the bat. This way, your investment in the software will match your revenue. If you don’t have much income as you build your business, you won’t feel as much of a sting using a free or low-cost option. And as you grow, you can upgrade your account for more robust functionalities.
2. Automate as Much as Possible
This ties in with the previous point. As you grow, a lot of things will likely start to fall through the cracks. It usually starts with small things that snowball into big things.
But automation is the number one way to make sure this never happens.
When your wholesale inventory system is built using tools and tech, there’s no room for mistakes, oversights, or human error.
You don’t need to make sure someone remembers to add all your returns back into your inventory count every week. Or update the seven fields of the spreadsheet that change after one new entry.
Nobody has time for that.
There are tools that can help you automate so much of your operations, like:
- Tracking your inventory in one or more warehouses
- Fulfillment operations
- Delivering customer orders
- Synchronizing your inventory and orders data across all your sales channels
- Reordering your stock at the right time based on automated forecasting calculations
3. Keep Track With Cycle Counting
Of course, a critical piece of your wholesale inventory puzzle is to have – and keep – an accurate count of your inventory.
For some companies, this means the huge and cumbersome task of counting their whole warehouse once a year (or more).
But cycle counting is a way to save yourself this big headache. It also helps you keep tabs on a more regular basis, in case there are types of items that you’d like to keep track of more closely.
Cycle counting works by segmenting your inventory, then creating a schedule where different items and locations of your warehouse are counted on different days.
One popular way to categorize your inventory is by using the “ABC classification.” Here’s how it works:
- “A” items are high-value or high-volume items that don’t cost a lot or take up too much space in your warehouse. You might count these more often than others, like on a quarterly basis.
- “B” items turn over regularly but have higher costs than “A” items. You might count them twice a year.
- “C” items account for the rest of your inventory. They have the lowest turnover and the smallest impact on your bottom line. You might count them once a year.
4. Aim To Minimize Your On-Hand Inventory
In an ideal world, you have exactly the right amount of inventory all the time.
We’ve accomplished a lot as a society, but haven’t quite managed to predict the future. (Yet.)
It’s rough when you run out of stock. But on the flip side of that coin, it can also be damaging to your bottom line if you consistently have too much of it.
The longer you’re holding onto a product, the more its value depreciates. And that means you’re losing money.
Here are a few ways to minimize your on-hand inventory:
- Use the ABC classification from the previous step. Prioritize restocking your “A” items since they have the highest turnover and value.
- Figure out if smaller order sizes are an option with your suppliers. You’ll also want to consider if this means you’ll miss out on bulk discounts, and whether the ultimate value is worth it.
- Use a tool to help with wholesale inventory forecasting so you can better predict what you’ll need to have in stock based on demand trends, seasons, and your company’s performance.
5. Set “Reorder Points” and Stay on Top of Them
Reorder points, also called ROPs, are a fancy way to say “the perfect time to order more products.”
If you choose to calculate your reorder points, the best way to make sure they’re accurate is to calculate the reorder point for every variation of every item you sell.
Say you’re selling a sweater that comes in different patterns and sizes. You’ll need to run through the formula for every combination. (Yep, all of them.)
In its simplest form, the reorder point formula is your lead time demand plus your safety stock.
Going into it a bit further, there are several lower-level calculations that make up your lead time demand and safety stock.
For example, your lead time demand is your average daily usage times your lead time. And your average daily usage is the number of orders during a specific period, divided by the number of days in that period.
I know. It can get confusing pretty fast if you’re not a math buff.
But once you have a solid grasp – and solid calculations – of the reorder points for all of your stock, your wholesale inventory management process is one step closer to being smoother and more optimized.
If you’d like to dig into the juicy details, Exponea has an excellent in-depth article that explains how to calculate your reorder point.
6. Optimize Your Warehouse’s Layout
When it comes to effective inventory management techniques, the warehouse’s layout is often overlooked.
But it can make a surprisingly big difference for your team’s ability to pick and pack and get things shipped as quickly as possible.
For example, consider the three top layout designs and how they can help supercharge your inventory management and product delivery processes: U-shape, I-shape, and L-shape.
Here’s the U-shape.
Here’s the I-shape.
You can also keep some of these warehouse layout and design tips in mind:
- When you’re planning, make a map that includes everything, even things like your offices and doors.
- Place your best-selling items close to your picking and packing areas so they can move through easily.
- Keep your picking area inside or next to your storage area so your team has easy access to everything.
- Keep the packing and shipping areas separate from the rest of the warehouse to maximize the flow of traffic.
- Test everything out before you finalize any changes. Do a walkthrough, including using equipment like forklifts.
If you want to master the art of warehouse layout and design, check out this great article from BigRentz.
What Is the Best Software for Inventory Management?
So many of your inventory management problems can be fixed with great tech. As I mentioned earlier, good wholesale inventory software can save you some major headaches and help to ensure that important tasks and details don’t slip through the cracks.
Even if you don’t have a huge budget for super-sophisticated automation software, there are plenty of tools available to help ease the burden of manual wholesale inventory management.
Let’s look at some holistic tools to help you on your way without breaking the bank.
Formerly TradeGecko, QuickBooks Commerce is a holistic solution for helping to run, automate, and optimize several aspects of your business, not just inventory management.
It offers a free 14-day trial. After that, you can start with the “Founder” plan, which is $39 per month. As you scale up, you can upgrade your subscription level.
Ordoro is another holistic wholesale inventory software. It describes itself as “a control center for all matters inventory,” helping you to manage inventory and ship orders from all of your business’s sales channels.
The company can even snag you USPS shipping discounts of up to 67 percent. The “Express” plan starts at $59 per month, with the option to upgrade as you grow.
inFlow is a full-service tool that helps with inventory, sales, purchasing, reports, and more. The company even offers a Smart Scanner, a handy custom Android smartphone with a built-in laser scanner that helps you handle inventory management steps wherever you are.
Like QuickBooks Commerce, you can test it out with a free 14-day trial. If you’re happy with what you see, you can start with the “Light” subscription for $71 per month, then upgrade when it’s time.
Finding Your Ideal Inventory Management Process
There are loads of inventory management examples out there and a virtually infinite way to get the job done well.
It’s all a matter of experimenting and testing out different methods and solutions until you find what works best for your business.
Using Excel spreadsheets and doing things manually can certainly work, but beware of when your business hits a point where it’s time to scale up. This is an ideal time to switch to a holistic, tech-driven wholesale inventory management system.
When you have the tools to help do the legwork for you, you’ll have more time to spend making the important business growth decisions that only you can make.
Any questions about your wholesale inventory system? Drop us a comment below.