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How can entrepreneurs effectively manage their business inventory? Inventory management is no easy task-despite the entry of various software products that promise the sun and the moon.

By Pooja Kothari

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A few years ago, I use to run an online store specialising in allergy-free foods. We bought stock from manufacturers and importers, and supplied it to families across India. Some of them lived far away in Jammu, Assam or Kochi. Others lived in villages of Rajasthan and Gujarat.

While we had a distinct sense of satisfaction from solving a pertinent problem in the lives of our customers, we were forever weighed down by the problem of managing the inventory of a perishable product like food.

Excel sheets made way for sophisticated software that promised to solve inventory management problems for a small business like ours. However, despite all our efforts—and the tremendous discipline required to enter every purchase and sale bill into that software—we could never match the actual number of goods with those that the software insisted were in our warehouse.

I'm sure it's a problem that most small business owners are familiar with. I'm told that most ensure that physical stock-taking only happens on March 31, given the effort involved in the task. And then entries are made to match the reality with the books.

Inventory management is no easy task—despite the entry of various software products that promise the sun and the moon. Now, couple that with ensuring the safety of goods from pests and theft, and the headache turns into a full-blown migraine.

Now, when I run StoreMore, an on-demand storage service start-up, we have to manage inventory of multiple businesses and households. The goods in our storage facilities range from files to furniture and appliances, with boxes full of clothes and books in between.

I have a ringside view of the problems of inventory that businesses grapple with. We are in the midst of signing on an importer of shoes, who needs help in finding the right product when an order comes in.

We are already managing the inventory of an importer of auto-parts, whose stuff get delivered to our facility; gets re-packed by our team with proper bar-coding and inventory; and then the same is delivered as demanded by their distributors across NCR. We are soon going to be managing the inventory of a Hyderabad-based reseller of kitchen appliances.

From my personal experience, here's what it takes to manage the business inventory:

  • Process discipline: Every item that enters our facilities is given a unique barcode. Then, that barcode is mapped to a location barcode. This allows us to track the movement of every good in the facility and find it at a moment's notice. We do not deviate from this process—no matter what time the goods arrive at our facility, or who is bringing them in. You will need to invest in a barcode printer and a reader, but neither of these is expensive these days. This investment will solve a major problem of knowing how many units of which items you have in stock, even if you are doing this on excel sheets. And that piece of information is vital to your cost management and sales processes.
  • Warehouse setup: Our customers are a mix of households and businesses. Families don't access their stuff as often as businesses do. We know that we will need to find the stuff fast to improve efficiencies in our re-delivery routes. So we have laid out our locations in a manner where items which move are often located near to the entry/exit gates, while those that will move only once during their stay in our facility are put towards the back of the facility. I'm sure it's true to most businesses that 80 per cent of the sales are generated from 20 per cent of the items. Identify those SKUs (Stock Keeping Units) and place them accordingly inside your warehouse.
  • Safety first: Most warehouses get pest control done once a quarter, if not a year. We opted for a costlier contract, which ensures that the service provider's personnel visit our premises every 15 days to keep rodents and pests out. The access to the storage area is controlled using either a card or a fingerprint in most cases. We make no exceptions to these rules. Period. This ensures that the physical safety of goods remains of paramount importance.

These suggestions are common sense. However, just following these simple steps will ensure that your goods can neither be stolen nor damaged by rodents; that you find exactly what you need when you need it; and that you know exactly what quantity of which SKU remains in the warehouse.

Once you do this for about 3-4 months, you will get to know the movement of your stock much better and will be able to build intelligence about how much stock to keep. This will help you unblock money from inventory that continues sitting in your warehouse and therefore, becomes difficult to get rid off.

Pooja Kothari

Managing Director, StoreMore

Pooja Kothari is an economics graduate from St. Stephen’s College and a post-graduate from Delhi School of Economics. She has been a management consultant with AF Ferguson, and a features writer with India’s leading daily The Economics Times, and most recently, the editor of Inc. India magazine. Writing has always been enjoyable to Pooja Kothari and she loves experimenting with new areas and genres.

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