Effective inventory management is essential for small businesses (SMEs/UMKM) to succeed. By balancing stock levels, they can meet customer demand, reduce costs, and improve efficiency. Here are key practices to optimize inventory management.
Based on my experience working with small and medium-sized enterprises (SMEs/UMKM), there are several key aspects of inventory management that require attention. This is especially important for entrepreneurs who are just starting their businesses and begin to see growth, with a monthly gross turnover exceeding 50 million rupiah.
At this stage, SMEs/UMKM need to become more aware of the supply chain processes that must be implemented in their operations, even if they are still operating on a small scale.
Below, I will outline some important and crucial points to consider in inventory management for small businesses (SMEs/UMKM).
1. Understand Your Inventory Needs
The first step in inventory management is understanding your unique needs. Analyze sales patterns, seasonal trends, and market demands to determine ideal inventory levels.
2. Implement Inventory Management Software
Use technology to track inventory in real-time, avoid stockouts or overstocking, and streamline reordering. Affordable software options are available for small businesses to ensure seamless control.
3. Apply ABC Analysis
Categorize inventory:
- A Items: High value, low sales frequency.
- B Items: Moderate value and sales frequency.
- C Items: Low value, high sales frequency.
Focus on critical items to optimize resources and improve profits.
4. Keep Accurate Records
Update inventory regularly (can be daily, weekly or monthly) and conduct audits (can be weekly or monthly) to match physical stock with records. Address discrepancies immediately.
5. Set Optimal Reorder Points
Calculate reorder points based on lead times, demand, and safety stock to avoid running out or overstocking for each item which in ABC Analysis parameter.
6. Monitor Suppliers
Evaluate suppliers for delivery reliability, quality, and consistency. Build strong relationships to ensure smooth inventory flow.
7. Minimize Dead Stock
Identify slow-moving items and reduce them with discounts, bundling, or discontinuation. Free up space and cut holding costs.
8. Use Just-in-Time (JIT) Inventory
Order stock only as needed to reduce storage needs and holding costs. Coordinate closely with suppliers for timely deliveries.
9. Forecast Demand
Use sales data, market trends, and predictive tools to anticipate customer needs and adjust inventory accordingly.
10. Train Your Team
Educate employees on inventory tools, tracking, and reordering processes. A skilled team ensures efficient management.
11. Automate Processes
Adopt automation for tasks like tracking, order generation, and low-stock alerts. Reduce errors and save time.
12. Optimize Storage
Organize storage with labeled bins and a logical layout to improve accessibility and speed up order fulfillment.
Effective inventory management is key to small business success. By adopting best practices like using technology, forecasting demand, and building strong supplier relationships, businesses can cut costs, streamline processes, and boost customer satisfaction—paving the way for growth and profitability.
These are some key points to consider for small businesses (SMEs/UMKM) that are growing or aspiring to grow. It may not be easy at first, especially if it’s unfamiliar, but starting with small steps and gradual changes will help your system and team adapt to the new workflow over time.
Last but not least, no business grows big overnight. Growth always begins with small steps and a new journey to embark on.
To all SME/UMKM entrepreneurs, I wish you all the best in your endeavors. Never tire of learning and growing—especially in the area of system management!
That’s all from me. I hope you find this valuable and insightful!
“Simplifying Supply Chains, Empowering Teams, Driving Success – Eddy Suryadi”
*Feel free to share this article with your network to help them gain valuable insights as well. For more tips and updates on supply chain management, don’t forget to connect with me on LinkedIn. Please note that all articles on this blog are available for use—personal or commercial—but must include proper credit to the author.
Originally posted 2025-01-09 22:42:00.