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How Inventory management has an impact on the overall process of an organization?


A series of actions or steps taken in order to achieve a particular end.

The end here is closing a deal, and the process that we will be referring to is the one that happens behind the scenes. Right when you receive an order from your customer, till the part when it gets delivered to them, inventory management plays a very significant role. A well planned inventory management strategy connects these dots, keep the data secure, and help a business satisfy its customers without any delay. Read on, to find out what are the three major aspects of the process a well-planned inventory management strategy can fulfill.

  1. Order management

    To understand order management let's take a look at these scenarios.


    Imagine a customer walks into a bouquet store, picks up his own choice of bouquet, proceeds to the checkout counter, makes the payment, and exits the shop. This is an example of simple day-to-day transaction that every store owner experiences.

    Now, let's take out each step of this process individually and find out how inventory management can play an important role.

    1. Product selection

      At this stage, inventory management comes into play when you need to identify, and keep track of the availability of the item that has been bought by the customer. By identification, we are referring to Stock Keeping Unit (SKU) of the item/s that the customer has decided to buy from your store. You can consider the factors like Manufacturer code, product code, item attributes (color, size, gender etc) while deciding on the SKU of an item. It's no rocket science but, at the same time follow these two guidelines before finalizing the SKU:

      1. Use alphanumeric codes

        Maintain a combination of letters and numbers as it becomes easy to remember and less confusing.

      2. Follow cascading methods

        While you determine the SKU of a product follow the cascading method or trickle down approach. Start with the Manufacturer code - Supplier ID - Product ID - Batch No - Product attribute. Keep this pattern uniform for all products so that it becomes even easier to remember them.

      Now, going back to our example, how SKU can help the bouquet shop owner? By keeping a unique SKU for all the different types of bouquet she will always be aware,

      1. Which item is her best seller?

      2. Which item is performing the worst?

      3. How much stock she holds?

      4. List of customers who bought that particular item

      5. How frequently she ordered the item from her supplier?

      6. How long the flowers stay fresh? (Tracking the shelf life)

      Maintaining an SKU will become all the more significant if she sells assorted bouquets to her customers. Refer the following table (planned). In case of such items, commonly known as Composite items, she has to maintain two separate SKUs, one for the item itself and one for its constituents. In the absence of that, her stock status records will be misleading.

    2. Invoicing

      Invoicing and inventory management! Sounds tricky, right? Although, we would not be talking about what are the tips you can follow to make your invoicing process more efficient (download our e-book to know more about it), but we will be sharing some useful inventory management tips which can make your invoicing process even better. Here we start.

      1. Barcoding

        You can save a lot of time managing invoices if you have an inventory management software that supports barcoding. Barcodes are system generated identification tags which are unique in nature. With bar code, you can do away with the process of manually entering SKU for each item while adding them into the system, creating sales order, and invoices. This way, the room for committing error also reduces. After generating an invoice there is always a chance that you might update the wrong SKU which in turn will lead to inventory mismatch.

      2. Item Description

        Although, it is a nice invoicing practice, it is also a good marketing tactic. An invoice is something that you hand over to your customer or send via email when a sale is confirmed. It is something that will stay with your customer in hard or soft copy or both. When you mention the description of the product that your customer has recently bought, it becomes an effective tool for brand recall. A good detailed description is direct reflection of the efforts that you are exercising in creating better products. This practice is more applicable when the item is personalized, custom made, or maybe exotic in nature. With intelligent use of words, a customer can have a very delightful experience and s/he is more likely to recommend your product to his/her peer or friend.

      3. Sales order number

        In a business, it is always advisable that you maintain sufficient documents for record keeping, analysis, and sometimes to warrant a claim raised by a customer. One amongst such documents is, Sales order. A sales order is generated once you receive an order from your customer and it shall be subsequently updated with the invoice number, package slip number, shipping carrier, etc. It is more of an internal document which act as a database of a particular transaction with a specific customer. This single document can fetch you a lot of information and come in handy during the following situations-

        1. Product return

          A customer might not be very happy with the product quality and might want to return the item. Product returns can become quite a mess to handle if you do not have proper records backing the transaction. Your sales order document can act as a peacemaker. When a customer initiates a request, you can always tally the information to check the authenticity of the transaction and if such an item was ever shipped from your warehouse or store to that particular customer.

        2. Delayed or bad delivery

          Most likely, the second most common complaint by customer is, delay in delivery or damage caused to the item during transit. Now, at such cases, you might not be at fault but, since you are the principal point of contact, you are answerable to the customer. If you update the sales order with the package slip number, shipment carrier, and bill; then you easily trace the company and get proper justifications.

  2. Warehousing


    If you own multiple warehouses or you stock the items at a small area in your store, check out some of these inventory management tips which can help you to quickly spot the right item, manage them without hassles, and also to avoid confusions. But, before you read this, you might want to check out our article on : Five things you need to consider before you choose the warehouse location

    1. Organization

      Inside a warehouse, you can implement some simple measures to organize items in a way such that it makes day-to-day working easy for you. By organizing, we mean sorting, categorizing, and placing the items at a location on the basis of the nature of the product, their movement, and relevance. To give you an example, if you stock items in your warehouse in different aisles, then the items which have a high velocity in sales should be placed closest to the entry so that, you or any of your employees do not have to walk till the end of the room to collect the item.

    2. Safety measures

      Be it stocking flammable items away from the regular ones or following some standard safety practices to avoid contingencies, hazard management is the need of the hour for every store owner. Such risks are nothing short of a holocaust for a business, and not being prepared for it will surely turn it into one, if it occurs. So, start your planning with something simple like,

      1. Stick labels on the aisle or pillars to highlight hazardous or flammable material areas

      2. Install fire hydrants and have a good ventilation system

      3. Make sure your staff wear adequate safety gear

      How this is a part of Inventory management? At the beginning, we did mentioned that Inventory management also plays an important role in driving up your profitability. Culminating losses and unwanted risks are some of the ways of achieving that feat.

    3. Install locator systems

      Just like barcode scanners make order management a breeze, RFID scanners can be very helpful in warehousing operations. RFID scanners are intelligent devices which are connected with a network and help you to keep track on the movement of the items in as well as out of the warehouse. All you need to do is, install the smart tags on the items and the scanners will detect the items even if it is not directly in the line of sight.

    4. Audit

      With the all the items well organized, safety measures at place, and the right technology, it's time to review your stock status. Although there is no fixed timeline to conduct an audit, it is advisable that you do it at least once a month. The main advantage of doing that is, in case of mismatch you do not have to go through a long trail to find out the reason. You can also do the audit in a phased manner that is, taking up certain categories of items or covering only specific areas of warehouse at a time.

  3. Packaging and Shipment

    Package and Shipment

    This is the section where order fulfillment comes into action. Order fulfillment is a process that consists of step that help you to deliver the items at your customer's doorstep in an efficient and cost-effective manner.It is a lot more important if you run a multi-channel business or you take orders from your customers via phone and then dispatch it for delivery. Here are some of the inventory management tips that could help to smoothen your order fulfillment process :

    1. Packaging tips

      1. Packing List

        Picking list are like directories (maps) which contains all the information about your product. Pick list facilitates work for your warehouse staff. Normally, a pick list consists of information like, name of the product, type, description, quantity to pack, location of the item etc. Depending the magnitude of the orders, the pick list can be prepared and handed over to the warehouse for the collection.

      2. Pick and pack Process

        It refers to the technique by which you decide to pick the items from your warehouse. It differs from one business to other. Here are few of the ways by which the process is done :

        1. Discrete - One at a time

          You pick items one at a time and as the orders come by. This time of picking process is mostly seen where the items is handed over to the customer over the counter. To give you an example, a customer has walked into your store to try out a shoe. But, due to the poor fit, he has requested for larger pair of shoes. In such cases you might need to send your staff to the warehouse to collect the pair.

        2. Batch Collection

          Instead of collecting the items one at a time in this process you collect multiple items in your visits. But, before you visit to collect the items, you collaborate all the orders for a particular SKU, known as batches. This type of practice is mostly followed by companies who have very limited number of SKU in their inventory. Due to this, they usually receive orders for these items repetatively. In such cases, following the batch method will prove to be very time saving approach.

        3. Wave Picking

          Under this technique, a time frame or a scheduling window is fixed for picking up the items from the warehouse. So, if the time frame is three hours then, during the day the warehouse staff will walk along the floor every three hours to collect the items for which orders has been placed during that time frame. The sceduling window is decided based on the volume and the frequency of the orders.

        4. Zone Selection

          A designated person is assigned to a zone in the picking area. Whenever an order is received, the worker will scan through it and pick all the items that fall in his assigned zone. After he has completed his zone, he will pass it to the worker handling the next zone and so on. This type of picking method is very suitable for supermarkets or a store selling multiple items ranging from cereals to hardware items.

      3. Packaging Materials

        The first thing that a customer notices when the item reaches their doorstep is the packaging of the product. The quality of material used, labelling, design, and the overall aesthetics of the package. With many options available to the customers, businessperson have to put some additional emphasis on the packaging of their products. A lot of customers weigh upon such factors while deciding to buy a product. So, it is evident that you put some efforts in deciding the packaging of your product before you ship to your customer.

    2. Shipping tips

      Choosing the right shipping carrier is not an easy task. There are certain factors to be considered, which when overlooked can cause drastic challenges to your business. To avoid that, we have compiled a list of few to do's that you should follow before zeroing on the shipping carrier -

      1. Service Standards

        Undoubtedly, the most important yardstick to measure the efficiency of a shipping carrier company. From the conduct of the staff to the accuracy in the delivery time, do not miss out on the important pointers while choosing the shipping carrier. To find out about the overall reputation in the market, consult with the other business owners.

      2. Shipping Costs

        After the first level of examination, the next most important criterion is to decide on the cost of shipping goods. The cost of shipping package will vary based on three main factors :

        1. Weight of the package

        2. Type of packaging

        3. Location of delivery

        All of these three factors will vary from one order to other but there is a little bit of homework you can do which can make your shipping operations a lot more effective and easy. You can create a seperate spreadsheet containing details like, Item name, SKU, Weight, Packaging type, etc. This effort will be very helpful when you sit down to calculate the shipping cost for the packages. When you know these details, you can just put in the figures quickly and find out the cost. This will save you a lot time and it will help you in decision making. Here are the links to some of the shipping rate calculators :

        Although, this seems easy, sometimes it can be overwhelming. Everytime sitting down and finding out the best rates, will take up a lot of your time. An inventory management software can be very helpful in such cases. It will serve all the shipping integrations at one place and fetch the real time data. Also, it makes printing shipping labels easy.
        Check out how shipping integration works with Zoho Inventory

      3. Post shipment updates

        One of the best ways of being connected with your customers and winning their trust is by setting up process which is very transparent and clear. Till the time the items gets delivered, a customer has an expectation that, her "most awaited package" will arrive right at time without any delay. What if you keep the customer informed about every movement the package makes after it has been dispatched from your warehouse or store? It will not only cut down customer queries and complaints but also, it will keep them updated about the whereabouts of the package. But, doing it manually will cost a lot of your time. Therefore, an integration with shipment tracking solution like, AfterShip can help you to achieve that requirement. All you have to do is to set up your account, integrate your shipping carrier, and you are good to go.

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