I’ve fought against the word “control” for a long time. “Inventory control” sounds obnoxious and, well, controlling. “Inventory management” sounds much better.
Luckily, there’s a major difference between the two, even though they’re interchanged frequently.
This article will discuss inventory management and why it’s a major factor in your business growth. No matter whether you have one truck or 100, you have to get “control” of your inventory management!
While contemplating the development of the inventory management at our business, I had memories that made me laugh out loud. In the early days of my career at Loc-Doc Security, our idea of inventory management was someone holding up a box of door hardware and asking, “who ordered this, and where does it go?” This scenario might cause you to laugh too, particularly if you recently experienced it. Obviously, that structure wasn’t sustainable for a growing business and can be draining on everyone involved.
When you’re the only person ordering parts, pricing them and installing them, you probably have a good idea of what you ordered and where it has to be distributed. When you add a second person, you have to be more intentional. When you add a third, it’s essential to your business to have a plan.
Every piece of inventory you purchase is an investment. It’s money that you put into a “savings account” that’s difficult to withdraw from. If you don’t know where that inventory is, what you have and how much you paid, your savings account might dry up. Each person I’ve spoken with about inventory management has their own perspective on how much you should keep, how often you should order where you should order it from and what’s important to have. But they all agree on one thing: Inventory = Money + Time, and mismanagement of either is detrimental to your business operation.
Over the years, I’ve spoken with locksmith business operations that have inventory that can be turned each month, meaning they keep what they sell in a month on the shelf, and those that keep nearly $1 million in inventory. While you might be shocked at those extremes, the issue is how accurately you track your inventory. It can be a struggle, but that never should be an excuse not to implement a system that allows you to do just that.
One of the biggest mistakes in inventory management is in not labeling or identifying items. If you don’t have a labeling system in place, start today by picking up some small stickers from an office-supply store or online.
Mark each item with a date of purchase. If you don’t know that, put the date you labeled it. This will be important for monitoring how long you keep items and help you to identify what you should repurchase and when.
We’ve performed this exercise several times, and it’s eye-opening to see how long an item has been on your shelves. We recently acquired a locksmith business, and some of the inventory had dates from the 1980s! It was great to have the dates, but it goes without saying that that isn’t a good timeline for a turn on inventory.
After you start this process, you can improve upon it. If you use software to manage your business (see “Picks to Click”), you might have an inventory module that you could use. If you don’t have that, many inventory-management stand-alone software options are available. I always recommend something that would integrate with the business software you already have, but for the task of inventory management, anything is better than nothing.
A Google sheet or Excel spreadsheet can be very helpful. Here are some templates that might be helpful, (https://www.smartsheet.com/free-excel-inventory-templates)
Beginning the inventory-management process can be overwhelming, tedious and oftentimes started and never finished. Let me challenge you to stay the course. Use all the cliches: Rome wasn’t built in a day; if it was easy, everyone would do it; etc. It isn’t glamorous, but it will be foundational for the growth of your business.
Put more simply, if you don’t have an inventory-management system — if you aren’t labeling your items, shelving and tracking your inventory — you’re wasting your money.
When you aren’t tracking your inventory, you might buy items that you already own a second time to solve a customer’s problem quickly. Meanwhile, that money you already invested continues to sit on the shelf.
Many distributors have programs to help you to manage your inventory or provide you with a tracking system for the products they sell to you. Depending on how you source your materials, this might be something to discuss with your favorite distributor. Ironically, they’ll want to stop in and count the inventory regularly to ensure accuracy.
After you label your inventory, rank it by A, B, C, D items:
- Category A: Sells daily
- Category B: Sells weekly
- Category C: Sells monthly
- Category D: Sells quarterly
This allows you to do “cycle counting,” which is a schedule to count each category on a specific time and counting your higher priority items more frequently. This breaks up your inventory and breaks down the potentially overwhelming task of counting.
Creating a regular schedule and sticking with it is a good way to stay on top of cycle counting. Our purchasing and warehouse team has counting as a daily key performance indicator. They focus on one shelf each day. Let’s face it: This isn’t a task most people are jumping up to volunteer to complete. However, it can be a massively effective action that creates revenue and profit opportunities for your business.
I can’t emphasize this point enough. I’ve seen and experienced several inventory-overhaul activities that failed miserably, because there wasn’t a plan to maintain them. A complete overhaul is a major time investment and can bring great value, but it’s exhausting and demoralizing if the overhaul is short-lived because it wasn’t accompanied by a management plan. So, categorize your products and make sure to schedule time on a visible calendar to maintain the count.
Bar Codes and Scanning
Bar codes were introduced in 1973, and many trades still struggle with an effective way to implement them. One business owner I spoke with was frustrated with bar coding, because it took too much time and wasn’t used by his staff.
We can come up with many reasons not to do this, but I believe that our industry (in manufacturing and distribution) should implement bar coding, QR coding and a UPC system that everyone can use. That’s a big lift and not in our near future, so it’s up to your individual business to develop a system and maintain it.
Here are a few things to consider about bar coding, and when I use the term “bar coding,” it could mean bar code, QR code or radio-frequency code:
- Mobile scanning: Most smartphones and tablets have the capability to use the built-in camera to scan codes. Consider this option rather than using a separate code scanner for daily use, unless you’re set up in a retail environment connected to a point-of-service station that has to have a dedicated code scanner. For field service and invoicing, consider a system that uses mobile devices for scanning.
- Receiving process: Print your labels during the receiving process. When you receive new product, don’t move it to the shelf until it’s labeled. Make it a habit. This is a major factor in managing the counting process.
- Work-order integration: If your team has to go in and out of multiple systems to complete all of their tasks, they most likely won’t use it. Creating integrations and weaving the process into your work-order management process ensures the work gets completed.
- Get everyone involved: Many hands make light work. If you followed the first steps, scanning and counting can be completed by anyone in your organization. If it’s connected to their mobile device, labeled on check in and integrated with your work-order system, when a part is used, it immediately is deducted from your inventory, and a reorder report is created.
- Make it easy: You try to make it easy for customers to do business with you, so focus on making inventory easy for your organization. No matter the size of your team, if your process is difficult, cumbersome or annoying, it won’t be maintained.
Having the materials you require to operate your business is crucial. Servicing customers quickly will be a deciding factor when customers choose you. Having too much inventory can rob you of the ability to be nimble and tie up valuable operating capital. If you have too much inventory, it might be difficult to purchase necessary equipment to launch additional services. Having too little inventory can put you in a tough position to provide timely service to your customers.
There’s no magic list of inventory you have to have. The magic list is curated from an intimate knowledge of your business, tracking data and sales reports, accurately identifying your materials and parts used so you can track actual sales of products and materials. If you don’t have that information, you can’t make factual decisions. You can’t get that information without starting the work of identifying, labeling, counting and managing what you sell.
Finally, understand that your first inventory system won’t be perfect — nor will your second or third. If you wait for a perfect time and a perfect system to implement inventory, it won’t happen. Mistakes will be made, hair will be pulled, but consistent progress is the only solution to a successful inventory system.
Chad Lingafelt is managing partner of Loc-Doc Security in Charlotte, North Carolina. Loc-Doc Security is composed of a Locksmith and Door division, an Electronic Security division and The Lab, a digital content creation and software development division.