How to: Manage Inventory

Know It All

The potential for getting stuck with unreturnable inventory is one reason business owners need to monitor what is and isn't selling. Schreibfeder recommends tracking each item separately. You need to know not just that you're selling 20 blouses per week, but how many blue ones and how many red ones.

Inventory management is his company's biggest problem, says Julius Howell Sr., owner of Deep Reflection Products Inc., a Goldsboro, North Carolina, company that makes and sells specialty cleaning products for the automotive, marine, recreational vehicle and janitorial industries. Deep Reflection must track ingredients and production supplies as well as the finished products it sells.

Howell used to do inventory by hand. "It didn't work well," he says. Now he uses a commercial software package that recalculates costs and markups in four different customer categories every time he reorders supplies. The software won't allow him to write an invoice for an order if that order will deplete his finished inventory below a specified amount.

Although Deep Reflections uses a sophisticated software program to accommodate different types of customers, many small companies can manage their inventory effectively with inexpensive software programs such as Peachtree Accounting (Peachtree Software Inc., $69 to $249, http://www.peachtree.com) and QuickBooks (Intuit Inc., $99.95 to $199.95, < ahref=http://www.intuit.com/quickbooks/>http://www.intuit.com/quickbooks/).

Fire & Spice Inc., a Destin, Florida, seller of hot sauces and gourmet condiments, uses QuickBooks, says Ann Reaves, co-owner with her husband, Bill. The company sells its own products, made by a contract manufacturer in Louisiana, as well as products from other food manufacturers. QuickBooks lets the entrepreneurs keep track of each item by company. The Reaveses are able to set the reorder point for each item separately, which is helpful because some items sell faster than others.

Even the smallest companies can use technology to help manage inventory, says Cohen at Coopers & Lybrand. Most products now come with computer bar codes, so distributors and retailers can scan in each item and track them all with a personal computer. "There are many software products on the market now for small companies," Cohen says. "Look for general accounting packages with integrated modules for inventory. They tell you sales information, who your customers are and what they're buying, and they tie in to invoicing."

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This article was originally published in the August 1998 print edition of Entrepreneur with the headline: How to: Manage Inventory.

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