What is the Process of Inventory Management?
Inventory management is a business term that refers to the strategic ways by which companies handle the items that they sell. From finding sources that sell items you are looking to purchase, to having a system in place for obtaining said items, inventory management also involves the act of pricing products in a manner that yields a profit.
You are probably familiar with the term inventory if you have either been employed by a business or co-owned a company at some point in your life. Inventory management also deals with figuring out how and where to store all of the items you plan to sell.
This is the step in between purchasing bulk supplies of stock and actually putting them up for sale to an audience. Inventory management is one of the most vital steps in the business marketing plans of coffee shop owners. As a small business owner, it can be very daunting to think about going up against bigger competitors and try to win over an audience that they appeal to.
On that note, something to keep in mind is that the size of a company is not necessarily the determining factor as to whether or not a company has the potential to scale and grow. It all comes down to your business practices. Educating yourself on best inventory management practices can put you ahead of the game.
With a smart mindset and forward-thinking strategies, you can incorporate inventory management practices that will undeniably elevate your business to a place of scalability. Starting with the basics, we will walk you through four of the most important business practices when it comes to inventory management.
From there, we will let you in on a little secret regarding the correlation between inventory management practices and the overall success of a business. Let’s get started!
Four of the Best Inventory Management Practices for Every Coffee Shop
Are you looking to improve the inventory management practices of your coffee shop? Pay close attention to these four inventory control techniques!
- Utilize the ABC analysis technique to stay on top of inventory
- Allocate inventory orders to the same persons every time
- Pay close attention to your coffee shop inventory KPIs
- Use data entry as a tool for inventory control
Utilize the ABC Analysis Technique to Stay on Top of Inventory
ABC analysis is an inventory management tactic that helps business owners break down their inventory. Essentially, ABC analysis really helps to make inventory feel more manageable. While this is especially helpful for larger businesses, ABC analysis can help companies of any size.
By dividing your stock into three separate categories, you can better understand the composition of your coffee shop inventory. ABC analysis uses the letters A, B, and C as categories. Store the details of your ABC analysis categories in a data entry file for future reference.
Let’s take a look at what each inventory control category comprises.
This is a list of all of your most profitable for-sale items. The variety of syrups, coffee beans, alternative milks, teas, and other store products that you either use the most, or sell the most of, will fall into Category A.
This ABC category is a compilation of items that you sell a decent amount of, but not enough to consider the products some of your top-tier, most profitable items. Category B usually consists of items that contribute to your annual sales enough to continue selling them, but at the same time, you would not completely ruin your business if you no longer carried them in-store.
If you have noticed the sequential trend, then you might have already guessed that all of the inventory in Category C is considered the least important of all items in your coffee shop. These products are still impactful when it comes to overall profits, but that's true of anything you sell. Category C is made up of all the items you could technically get rid of, and the odds of anyone noticing would be slim to none.
Allocate Inventory Orders to the Same Person Every Time
In both business and in life, when you find something that works for you, stick with it. Consistency is a business management practice that often gets overlooked. When it comes to handling inventory in the most efficient way, it’s important to integrate consistency in one very specific way.
Assign inventory-related tasks to the same person. If there is an employee who you trust with the handling and ordering of inventory, ask them if they would be interested in placing inventory orders on behalf of the business. This person should also be the one responsible for taking count of inventory on a weekly basis as well.
Staying on top of inventory can sometimes feel like an overwhelming task, but when you adopt this business inventory practice, you’ll see that it doesn’t have to be complicated. All it takes is one person whose main responsibility is tracking inventory and placing orders so that your coffee shop is always stocked with the necessities!
Pay Close Attention to Your Coffee Shop Inventory Control KPIs
Short for key performance indicators, KPIs reflect the literal performance of your business. If you are curious as to how your coffee shop is doing in a certain area of business management, take a look at formulas for calculating KPIs.
When it comes to inventory management practices, KPIs are one of the best ways of understanding what products sell, which items stagnate, and everything else in between! KPIs will help you ensure that your customers are satisfied, too.
There are seven major KPIs that coffee shop owners should pay close attention to! Keep an eye on the values of these KPIs in order to optimize your business’ inventory management practices…
- Cycle time KPI
- Fill rate KPI
- Inventory turnover KPI
- Inventory carrying costs KPI
- Inventory write-off KPI
- Inventory write-down KPI
- Order status and tracking KPI
Use Data Entry as a Tool for Inventory Control
Data entry for coffee shop owners is another tool that will help you manage your inventory! Keeping track of your inventory order history is key to managing inventory effectively. Always record your inventory purchases and use the data to better understand your demographic.
Data entry is often misunderstood. It is not uncommon for people to view data entry as something that only accountants and money-related professionals do. But the truth of the matter is that all business owners should acquaint themselves with data entry as an inventory management practice.
Inventory Control Management Practices Change the Game
If you haven’t already implemented strong inventory management practices, then you are in for quite an improvement within your business! One of the most important business practices is inventory management.
By taking a serious interest in your inventory control and implementing data entry as a way of staying on top of your inventory management, your business will reach a whole new level of organization. The best part about inventory management business practices is that they fit into coffee shop marketing plans very smoothly.
You will likely find yourself wondering how you operated your business without these inventory management practices, and we don't blame you! Now that you know how to make inventory control easier for yourself, you'll find yourself never wanting to revert to your old ways again.