29 Experts Reveal How Small Businesses Can Improve Their Inventory Management Processes

Small businesses, particularly those that are growing, often struggle with inventory management. Many end up utilizing outdated or manual processes that are anything but efficient.

As a company grows, however, inefficient inventory management becomes a major headache rather than a minor annoyance, and the need to improve inventory management processes becomes both real and urgent.

To find out what small businesses should be doing today to improve their inventory management processes and develop scalable systems that can grow seamlessly along with their companies, we reached out to a panel of inventory management pros and business owners and asked them to weigh in on this question:

“What’s your #1 tip for small businesses to improve their inventory management processes?”

Meet Our Panel of Inventory Management Pros and Small Business Owners:

Learn about the strategies you should start employing today for better inventory management by reading what our experts had to say below.

Daniel Malak

@motionloft
Daniel Malak works for Motionloft. He is a retail industry maven who loves to help retailers, commercial real estate investors, and smart cities use data to enable growth. His background includes a deep knowledge of merchandise marketing, development, and retail operations.
“The best tip for small businesses to manage their inventory is to optimize…”
Their supply chain orders. To do so, organizations should understand the amount of traffic that passes by their property, establish a conversion rate to benchmark the average number of people who come inside, and then run an analysis to see, of those people who entered, how many purchased and what items they bought. Buying deeply in stock that sells fastest ensures that inventory moves quickly. Having a lesser amount of on-hand stock makes it easier to track and can reduce carrying costs.

Lisa Chu

@BlackNBianco
Lisa Chu owns Black N Biaco, a small business that provides affordable and adorable children’s formal wear.
“A real effective way to improve inventory management is…”
To use an inventory management software solution or app. By using inventory management software you will have the ability to track and measure your existing inventory. It will also help you instantly calculate the estimated cost of holding products and set automatic reminders when certain items will soon be out of stock. The app or software will also provide you a detailed analysis of all of your products, giving you the ability to restock your top selling items. Having a centralized location of your inventory data allows you to efficiently manage your products, especially if you distribute through multiple channels. Regardless of the size of your small business, inventory management software and apps are affordable and will be very useful in minimizing financial inefficiencies.

Neil Mclaren

@neil_october
Neil Mclaren is the founder of Vaping.com, a leading online supplier of vaping devices, supplies, and accessories.
“My top tip is to plan for…”
Contingencies and possibilities. No matter how well you predict your business’ inventory needs, your inventory management process will never be perfect. Not having enough product and having too much product are both issues that can lead to inefficiency and revenue loss. Consider every possibility of what could happen and be sure that you have contingency plans in place in case these issues come up. Consider what the plan will be if your supplier runs out of a specific in-demand product, or what steps you would take if you got an instant surge or decrease in demand of one of your items. Issues will arise at some point, and the more prepared you are to face these issues, the less stressful it will be to implement a successful solution.

Jan Bednar

@TheShipMonk
Jan Bednar, CEO of ShipMonk, moved to the US from the Czech Republic at 16 to pursue the American Dream, and he has found it with tech-based 3PL firm ShipMonk.
“Figure out what to do with your slow-moving/obsolete inventory (SLOB)…”
Warehousing space is limited, and you need to make sure that you have a plan for eliminating SLOB as its very existence occupies space that could be used by higher-traffic inventory.

Huib Maat

@pairfum
Huib Maat is the in-house perfumer/founder of Pairfum and has a track record of successfully inventing, developing, and launching products and perfumes that have succeeded and became trend-setters.
“Our #1 tip for small businesses would be to…”
Invest in a cloud-based inventory management system. There are many systems available to choose from including Linnworks, Cloudcommerce, Plentymarkets, etc.
In this context, we see the ability of cloud-based software (SaaS) to integrate with other cloud platforms as THE key benefit for the foreseeable future. We see SaaS for small- and medium-sized businesses as an interconnection of modules from different companies that are all the best in their field. We do not believe that one system can do everything. Instead, it should connect accounting software, shopping feed generators, web shops, email newsletters, purchasing … the list is endless.
This is how a company like ours can compete with the ability of multi-national corporations to invest in custom-made software systems from suppliers such as SAP.
With a system like Linnworks being at the heart of our company, it is its ability to integrate and connect with a multitude of external service providers that defined our decision to use Linnworks.

Justin Guinn

@RetailPOSAdvice
Justin Guinn is a Market Researcher at Software Advice, covering technology and changing trends in retail and field service. His work has been cited in dozens of notable publications, including The New York Times, Forbes, The Huffington Post, and TIME Magazine.
“My number one tip is to…”
Automate, automate, automate.
Small business operators have enough to focus on without constant inventory woes. And the shift to digital business now has inventory being pulled from multiple purchase points. Businesses now more than ever need dedicated inventory management software to track inventory balances across locations, organize and classify products for easy filtering and lookup, and for setting automatic reorder parameters based on preset quantities.
With truly disruptive technologies on the horizon like Blockchain, autonomous vehicles, and advances in AI and machine learning, it’s crucial that businesses start laying the foundation for a data-driven operation. Inventory management systems are the first step in this quantified business plan. The data gathered from monitoring inventory movement and internal inventory processes will help optimize current operations and open the door to an easier adoption of technology down the road.

Saloni Doshi

@ecoenclose
Saloni Doshi is the Owner of EcoEnclose, a sustainable packaging company based in Colorado that helps small- and medium-sized businesses ship products in an environmentally responsible manner.
“Forecast your holiday sales…”
The holidays can be a great time for business, but you need to be careful in your planning to avoid overstocking or having products on backorder and losing potential sales. First, build reasonable forecasts for your Q4 sales. You can do this by adding a bump to what you sold during the same time last year, or by adding a standard 30% to your Q3 sales if you don’t have access to last year’s data. You may decide to be aggressive with your forecast if you have a solid cash position, ample storage space, and produce goods that can be sold after the holidays are over. You should be more conservative with your forecasts if this isn’t the case. Then, order your raw goods from vendors according to your forecast, planning around their lead times and the time it takes for you to produce your goods once raw materials are in the door.

Robert Ellis

@massagetablenow
Robert Ellis is the Owner of Massage Tables Now, an e-commerce store that provides massage equipment and supplies to massage therapists.
“Keep a close eye on product sales mix and short term trends…”
Use that information to influence inventory levels through purchasing and production. Plan promotions in advance to move aging inventory and set a shelf life for what is considered promotional. Even if you profit less from discounting older inventory, it gets things moving. Those dollars are better off being reinvested in faster-moving items with higher margins.

AJ Saleem

@SuperxLearning
AJ Saleem is the Director of Suprex Tutors Houston, a leading private tutoring and test prep company based in Houston. AJ has created a big dent in the private tutoring market by offering well-trained, highly qualified teachers who are also dynamic instructors. The company also operates in New York and Chicago.
“Two things that someone should focus on are…”
Automation and accessibility. Inventory management should be automated. I don’t mean that it should automatically be done, but there shouldn’t be the need for someone to explain how to get it done. Someone should create a manual that can easily be followed so anyone can do the job. In addition to automation, inventory management should be easily accessed. It should be on the cloud and everyone should be able to view and make edits. There should be no confusion as to which file is the main file.

Amanda Hill

@timblogspvc
Amanda Hill is the Marketing Director of PVC Fittings Online.
“If I had to give one tip to business of any size wanting to get a handle on inventory…”
It would be to implement a company-wide cycle counting program. This goes beyond having your “inventory person” in the warehouse counting stock all day. This is a year in, year out cycle counting program where every single employee participates.
Cycle counting is where a small section of SKUs are counted daily in order to audit your inventory, correct it, and most importantly, discover why inventory is not correct. Total physical inventories are somewhat helpful. This is where you count your entire inventory at once. Most companies do this at least once a year. A total physical inventory lets you get a picture of how truly off your inventory is and helps you correct the numbers briefly. Before long, of course, the same old procedures are going to lead you back to the same old inaccurate inventory. While a total physical inventory is a way to get a snapshot of the sick patient, cycle counting is a way to dig in and diagnose why the patient is sick and see what we can do to correct it. This is the absolute best way to stay on top of your inventory.
Beyond just implementing cycle counting, it is important for every single employee to be involved, from the owner to the person taking out the trash. Every person in your company should understand how your inventory processes work and how inventory affects your company. This is how you get everyone to buy into how important inventory management is. It needs to be a company-wide effort, not just one person’s job.
When we first announced our cycle counting program at my company, it was not an immediate success. We started with a goal to cycle count all our “A” items (the top 20% of items that make up 80% of sales). Every single employee was assigned a list of SKUs to count one day each week. It wasn’t a smooth and easy process at first. We had to stay on top of people’s counting, and we discussed it at every meeting. We even tied some goals and incentives to successful counts. Eventually, it started clicking with people, and employees became much more aware of how they affect inventory and how inventory affects the company.
Today, we have a much better handle on our inventory processes, because cycle counting keeps us healthy. We are able to constantly keep tabs on accuracy and diagnose any issues that arise. From there we can adjust and correct processes on an ongoing basis as our company continues to grow.

Ozair Akhtar

@ozair_akhtar
Ozair Akhtar is a Freelance Content Writer currently working for Monily.com.
“To remain 100% efficient, you need to…”
Do panned audits and on a random basis.
These types of audits generally help in the assessment of your inventory management procedures for their quality and accuracy. Stocks that have been stolen, misplaced, or become unusable or damaged for any reason can be identified and proper adjustments can be made.

Najeeullah Babar

@bloggerkhan
Najeeullah Babar is President of Web Development & Consulting Co. InterloperInc.com, based out of Dallas, TX.
“The best tip for improving inventory management processes is to…”
Use a service like UploadMyProducts.com to synchronize your inventory across multiple marketplaces like Ebay, Amazon, Rakuten, Walmart, Google Shopping, etc.
You need to upload your inventory to multiple marketplaces to get in front of customers. The more people see your products, the better your chances of making a sale. But synchronizing becomes impossible if you have a lot of products and start doing well on the various marketplaces.

Nico Muoio

@freespeechgame
Nico Muoio is a teenage entrepreneur prodigy, creator of the game Freedom of Speech. Nico started his first profitable business at 9 years old and is now 18. He has currently prioritized business over college in order to launch his latest venture: Freedom of Speech, LLC. He is a success and has already solved business challenges from a unique perspective.
“My number one tip for improving inventory management processes for SMBs is to…”
Always have a well-thought-out plan, not only from a profit margin perspective, but also from a logistical perspective. An EOQ formula also helps if you can afford to warehouse larger amounts of stock somewhere.
My biggest failure was a watch reselling business I started in my sophomore year of high school. My website, Time Warp Time Pieces, marketed cheap, Chinese skeleton watches as a fashion item that every “gentleman” needed for their everyday attire. The reselling website struggled to gain traction as pricing was not nearly competitive enough to compete with other companies similar to ours. I quickly learned that the dropshipping business model I’d envisioned was not going to work because my competitors had inventory and therefore were able to ship and sell the watches much faster than I could. Not giving up yet, I decided to invest money I’d saved from prior businesses to take on inventory in order to compete with the shipping times of my competitors. The costs to run the business quickly got away from me, causing me to discontinue it. In an attempt to regain some of what I’d invested, I hastily sold the remaining watches in my inventory to kids I went to school with. It also taught me to fully know my market and understand the true demand for my product before investing my money. This was definitely an expensive lesson to learn, but one that helped prepare me for a more successful business.

John Crowley

@peoplehrms
John Crowley creates useful content about human resources, people management, and cloud technology. He works as Head of Content for People HR and manages the popular People HR blog.
“To improve inventory management processes…”
If you choose a cloud software provider who can prove that they follow good information security practices, then it’s one less area of business you have to worry about securing yourself. For example, an HR professional looking after employee information is bound by data protection legislation, because this is classed as ‘personal data.’ If the HR department is using local systems and procedures, then the information security team needs to ensure these are being managed appropriately. If the HR department uses a cloud-based HR software provider, then as long as you can verify that the vendor takes information security seriously, you can sort of ‘set and forget’ for this area of business. Ideally, you’ll want a cloud software provider to by ISO27001 accredited – this is the international standard for information security management and proves that the provider has been independently audited and meets the requirements.

Scott Frederick

@LogisticsPlus
Scott Frederick is the Vice President, Marketing for Logistics Plus Inc. (a leading worldwide provider of transportation, logistics and supply chain solutions).
“My number one tip for how small businesses can improve inventory management processes is…”
Outsource your inventory management to an experienced third-party logistics (3PL) company that specializes in warehousing and fulfillment.
Utilizing a 3PL warehousing and fulfillment provider allows you the flexibility to set up and scale your distribution model as business demands shift. By housing your inventory under the roof of a 3PL warehouse provider, you allow for multiple shipments to be shipped in a more economical manner than might be possible otherwise. Leveraging a 3PL that has strong technology solutions means you can level the playing field when it comes to inventory visibility without investing hundreds of thousands of dollars in systems and IT infrastructure. A 3PL can also scale its operations to address your fluctuations in demand and will allow you the ability to easily forecast the landed cost of each of your products.

Fergus Macdonald

@fergytweets
Fergus and his wife Emma run Eagle & Fox – an online retailer based in Edinburgh, Scotland. Their brands Kilt Society and The Tartan Blanket Co. offer traditional products brought up to date for the modern consumer.
“Automate everything you can…”
Software and systems are getting smarter and cheaper every day. Use those tools to your advantage and automate absolutely everything you can. The less room for human error, the fewer mistakes. Correct and accurate inventory and shipping means that stock checks are quicker, you never oversell, you get fewer returns, fewer upset customers, and all your other systems run more smoothly.

Scott Toal

@oeveo
Founding partner of Short Run Pro and its subsidiary brands, Federal Brace, Killarney Metals, Oeveo, and Bison Built. Mr. Toal’s experience is in development of niche market brands to support under-served consumers with innovative solutions.
“Use visual markers along with your computer systems and cycle counts…”
Even the most complete management systems will have holes. When inventory process failure happens on your fast-moving SKUs, it hurts. The best protection against inventory problems are eyes. Use visual markers in your picking stations that indicate estimated part counts and train your staff to alert when those markers show levels are low.

Mario Serna

@CeremonySupply
Mario Serna works with Ceremonial Supplies. He is an e-commerce professional with more than 11 years of experience. A great part of that experience has been in warehouse management, which heavily involves inventory management. This is especially important in e-commerce because the customer is not physically present to guarantee availability.
“My best tip to help improve any businesses’ inventory management is to…”
Minimize manual processes as much as possible.
Unless you are a highly technologically advanced business, it is almost impossible to eliminate manual labor from inventory management processes. However, what you should minimize are the amount of steps that a person has to take to get an accurate inventory count. In the modern age, there is no reason why any business should be operating with old-fashioned manual counts, handwritten inventory sheets, and manual entry into the database. There are countless affordable software applications for inventory management that can be operated from a tablet or even a smartphone. What you really need to verify is that the software can integrate a barcode label scanner that does the count automatically. There are barcode scanners that connect wirelessly via Bluetooth, giving the inventory-taker the freedom to move around without a cord getting in the way. This minimizes the margin of human error that comes with mentally counting while sorting through merchandise. The scanner automatically logs/updates the count in the software, so all you have to focus on is scanning each item individually. Even then, accidental double scans or the occasional software/connection glitch may occur, but it is far less than the number (and kinds) of errors that manual processes can produce.

Danny Ing

@cin7online
Danny is the Founder and Chief Architect of Cin7, a cloud-based inventory management solution. Raised and educated in New Zealand, Danny lives and works in Auckland where he has built a career helping companies improve their business processes to thrive in a multi-channel world.
“Small businesses should keep their inventory management processes as simple as possible…”
The less redundant data entry their process involves, the better off they’ll be. Simplicity allows them to spend more precious time and staff resources on developing, marketing, and selling their products and less time on administration.
Small businesses commonly manage inventory separately from their purchase orders, invoices, and accounting. This means that every time a company receives a shipment or dispatches an order, they must process sales and invoices in one place, adjust their stock in another, and update their financials in yet one more data entry point. Not only does this complicate inventory management, but it also buries the latest stock quantities and costs in spreadsheets and ledgers, rendering the information virtually useless for making time-critical inventory management decisions.
A process that integrates these steps with a single solution can dramatically reduce administration and data entry requirements and provide real-time visibility of stock quantities and costs for making crucial business decisions.

Jack Shinder

@AMBICODOORS
Jack Shinder is the President of AMBICO.
“Make sure all staff understand and utilize the process that is in place…”
One of the most common reasons a team’s inventory management system is not effective is that members of the team or perhaps even full departments aren’t using it correctly. This could be due to neglect, or it could be a matter of requiring better explanation and direction or perhaps requiring a system that integrates better with the natural workflow. Take time to train employees on the systems and protocol and hold team members accountable for following these instructions.

Reuben Kats

@falconwebsites
Reuben Kats is a Web Designer for Falcon Marketing.
“From previous experience working in a warehouse, one needs to make sure things are always up to date…”
Whether or not sales are being made, employees, co-workers, and others still may be vulnerable in getting items from the actual store. One needs to record all purchases, invoices must be shown, and stock needs to be responsive both online and offline. One must implement a platform such as Magento in order to avoid any future issues with the back-end platform. If a company has a lot of stock in their system, they need to see what products are selling the most, re-count the products, and update the products in the inventory. Make sure a weekly report is provided to the CEO and anyone else that may need to know.

Bradley Shaw

@ExpertBrad
Bradley Shaw is the owner of SEO Expert Brad Inc. He has been a Digital Marketer and Online Consulting Expert Since 1997.
“My top tip for improving inventory management processes is to…”
Implement quality control. Quality control is of utmost importance in any size business and should be implemented immediately. Having a process to ensure quality can be directly linked to customer satisfaction and business growth. Starting quality control procedures can be easy as making a checklist that provides all procedures employees need to follow when checking the goods they receive. For example, you could ask workers to examine products for the following:

• Signs of damage such as leaks, tears, or broken seals.
• Product colors, styles, and sizes – all must be identical to the description on the purchase order.
• Prices and terms of sale – when all employees are working toward the same goals, quality will increase.
  

Dr. Ameerzeb Pirzada

@ZDentalStudio
Dr. Ameerzeb Pirzada is the Chief and Consultant Dentist at Z Dental Studio.
“To improve inventory management processes, companies should…”
Use the early in, early out approach (EIEO).
Goods or products should be sold in the same chronological order as they were purchased. The EIEO approach is an absolute necessity for items such as food, flowers, makeup, and other items which are perishable. A restaurant owner, for example, should be fully aware of the food inside the kitchen and apply the EIEO method to improve the kitchen inventory. Furthermore, it’s also a good idea for nonperishable goods since items sitting around the storage can be easily damaged by anyone, or otherwise get out of date and make it unsellable.
A perfect way to execute EIEO in a storage unit or warehouse is to add new items from the back so the older products are at the front.

Ostap Bosak

@MarquisGardens
Ostap Bosak is the manager at Marquis Gardens, the largest Water Feature and Pond Supply Retailer in the Toronto area.
“My advice would be to…”
Implement an end-to-end computer system to run one’s inventory.
It might come as a surprise, but many small to medium companies are still running on paper and sometimes Excel. Even the simplest inventory software system allows tracking incoming and outcoming inventory, as well as current stock levels. Marquis Gardens became computerized only a couple of years ago, but it had a tremendous positive impact on our business. There are many fewer mistakes and man-hours involved. It has also almost eliminated the occurrence of shortages or overstocks in our business.

Gary C. Smith

@NAEIR
Gary C. Smith is President and CEO of NAEIR, National Association for the Exchange of Industrial Resources, the largest gifts-in-kind organization in the U.S. NAEIR has received donations of excess inventory from more than 8,000 U.S. corporations and redistributed more than $3 billion in products to non-profits and schools.
“The best way to improve your inventory management processes if you’re a small business is…”
Have you ever considered donating your overstock to charity?
It’s called ‘product philanthropy’ or ‘ gifts-in-kind donations.’ It’s faster and easier than the methods you’re currently using. It’s more financially advantageous, too, thanks to a little-known tax break.
You may never have heard of IRC Section 170(e) (3), but it’s a key piece of tax code. It states that when C Corps donate their inventory to qualified nonprofits, they don’t just receive a tax deduction: they can receive a tax deduction equal to up to twice the cost of the donated products. Under the tax code, deductions are equal to the cost of the inventory donated, plus half the difference between the cost and fair market-selling price, not to exceed twice the cost.
You don’t have to go hunting for worthy not-for-profits to accept your excess merchandise. A gifts-in-kind organization will do all the work for you. Gifts-in-kind organizations are 501c3 nonprofits that exist to collect corporate product donations and then distribute them to qualified nonprofits. A gifts-in-kind organization should accept 100% your overstocks, at any time throughout the year. It’s particularly helpful when consolidating a warehouse, transitioning between selling seasons or dealing with a run of returns.
The time you’ll save — and the tax benefits you’ll reap — aren’t the only advantages to making gifts-in-kind donations. You’ll also:

• Protect your brand – Discounting inventory devalues your products and your name, while making corporate donations elevates your brand.
• Enhance employee engagement – Employees like working for companies with heart. Sharing the names of the charities that benefited from your gifts-in-kind donations makes great employee newsletter content that raises morale.
• Keep your inventory current – There’s no reason to hang onto obsolete stock when you have such a simple process for moving it.
• Keep your warehouse uncluttered – Storage space is valuable. Most gifts-in-kind organizations will accept both large and small volume donations at any time, allowing you to better manage your warehouse space.

Justin Laxton

@alltravelsizes
Justin Laxton is the Sales & Marketing Manager for AllTravelSizes and Weiner’s Ltd. He is also responsible for many of the companies’ projects, which have included a warehouse efficiency audit and setting up procedures for every task they do.
“My top tip for small business to improve their inventory management process is…”
To have an organized and labeled warehouse/storage area with defined procedures for each step of the process.
An organized warehouse/storage area allows for products to be found and anyone in the organization to know how much product is available at any time. An organized warehouse/storage area alone won’t do much if nobody knows where to find items.
We ran into an issue where we were growing at about a 40% rate for the last two years. We didn’t have overstock locations for products recorded anywhere, so anytime product wasn’t in its main location, our stockers and order pickers were wasting time having to look for product.
Once we began labeling where products were in overstock – we have an inventory management program called Acctivate which allows us to record item locations – we saw a dramatic decrease in the amount of time it took for an order to be picked and in the amount of time it took to stock the main item location.
In addition, the second part of this is to clearly define procedures for how each step of the warehouse/storage process. We found that by putting in writing how products should be received, manufactured (when applicable), stocked, and how orders should be picked, packed, and shipped, provided us with an equal time savings and contributed to a much better managed inventory.

Rachel Baileys

@thescarpetta
Rachel Baileys is the Marketing Manager for The Scarpetta, an online retailer for women’s designer shoes.
“My #1 tip for inventory management is…”
To track and collect as much data as possible, especially inventory movement data. This allows you to have so much valuable insight on what is working within your inventory. You would be surprised how long a pair of shoes has been sitting on the shelf or how quickly others move.

William Swift

@OhMattress
William Swift is a manager of marketing department in a mattress company. He shared several useful sleeping tips and knowledge about mattress on his blog.
“My No.1 tip would be…”
Looking at your sales data.
Sales data tells you everything about your small business far more than who bought your products and you can easily spot obvious trends or seasonality. You can also find some less obvious un-explainable patterns. It would make you confident when managing your inventory. But the problem is that you will have not much enough data to look at if you’re just starting up your business. You might have guessed the answer –look at your competitors!

Andrea L. Brady

@ConcannonCPA
Andrea L. Brady, CPA, is a shareholder at Concannon Miller, a CPA and business consulting firm with offices in Bethlehem, Pa. and St. Petersburg, Fla. She heads the firm’s audit and manufacturing teams.
“My top tips for improving inventory management processes are…”
Proper ordering: Managers or other appointed employees should order properly to ensure that last minute purchases of product are a very rare occurrence. Technology can be very helpful in the ordering process. In this age of information, you should already know how much inventory you use in the day-to-day operations of your business and when your deliveries are arriving.
There are times when last-minute purchases are necessary, but it should never be because management doesn’t know how to order. This should only be done in the case of unforeseeable circumstances. An example of unforeseeable would be loss of product due to equipment failure or a delivery was shorted.
Another would be if your business had an unexpected busy day – that’s unforeseeable. However, if it occurred during a known regular busy period, then that is foreseeable and the staff should have ordered to handle the additional sales. Management needs to be keenly aware of the business’s regular busy and slow periods to properly handle inventory ordering.
In addition to the higher costs of having to buy back-up inventory last minute, another cost factor is the fact that someone may have to leave the business to get the product. You are now paying someone to drive to get product rather than performing their usual work duties.
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