inventory management

Proper inventory management is the key to a sustainable and profitable business. It leads to enhanced cash flow, and promotes and supports growth.


Small businesses, in particular, need a strong inventory management system – to track inventory and sales, and ensure capital is not locked in by old or obsolete stock.


Here are 10 cost-effective ways small business owners in South Africa can maximise inventory management and boost the bottom line.


1. Maintain an organised inventory

Taking the systematic approach to inventory storage is the first step to enhanced inventory management. It supports the optimal flow of goods from the supplier to the warehouse and the warehouse to the point of sale. 


An organised and well-labelled inventory is easier to count, track and retrieve. By organising goods according to type and labelling boxes with stock-keeping unit numbers or scannable bar-codes, moving stock from A to B – and knowing exactly which items have to be replenished – is a cinch.


2. Enforce the First-In-First-Out Rule 

An organised inventory management system is couched in the first-in-first-out (FIFO) rule. The stock that’s first into the warehouse is distributed to the various sales channels before any other inventory of the same type.


That way you can circulate the inventory according to age or sell-by date and avoid being saddled with product that spoils or is no longer in saleable condition.


3. Optimise the Warehouse Layout  

You can advance the FIFO approach to sales and distribution by optimising the warehouse layout. Best practice is to store fast-moving stock at the front of the warehouse, next to the fulfilment area, and slow-moving items at the back.


Installing accessible storage solutions, such as flow racks or roller racking, is a long-term investment that can pay for itself 10-fold.


4. Clear out old stock   

A warehouse full of old stock is a liability, especially to small businesses struggling to stay afloat. When there’s no longer demand for a product line, it’s time to unload it as quickly as you can, even if you have to take a loss.


Consider selling old and obsolete stock at a heavily discounted price. If all your efforts fail, donate the inventory to a worthy cause and turn it into a PR coup. That way, it may be possible to recover some of the losses by attracting new clients.


5. Invest in an inventory management app  

Most small businesses can’t afford sophisticated cloud-based inventory management systems but there’s another, more affordable solution.


There are dozens of feature-rich inventory management apps that are either free or available at a nominal price. A sample of what’s available at the Google Play and App Stores includes: Sortly, Inventory Now, Stock Control, On Shelf and Goods Order Inventory.


6. Conduct ABC inventory analysis   

A helpful way to manage inventory is to divide the product into three groups and analyse each group separately.


In the business setting, the “ABC” in ABC inventory analysis refers to three groups:

  • group A – high-value products with low sales
  • group B – moderate-value stock with moderate sales
  • group C – low-value inventory with high frequency of sales.

In this scenario, group A analysis should be prioritised to determine how to improve sales and profitability.


7. Establish Minimum Re-Order Levels 

It’s a good idea to set minimum re-order levels on all inventory. When stock drops below these levels, it’s time to order more product from the supplier.


In the small business setting, it’s common practice to implement a Just In Time ordering process where just enough stock is ordered to breach the minimum re-order levels and satisfy existing customer demand.


8. Adopt a periodic inventory valuation model  

Carrying out a periodic inventory valuation allows you to work out the value of existing stock. In this model, product is recorded as it is sold but the inventory is not automatically updated.


Physical stock takes are still required to tally the numbers of warehoused stock against what has been sold.


9. Outsource inventory management  

With business growth, inventory management becomes increasingly time-consuming and complex.


Outsourcing inventory management can be an efficient and cost-effective solution. A range of logistics specialists offer comprehensive warehousing and fulfilment services. This leaves you to focus on growing your business.


10. Store inventory affordably

Initially, startup businesses may store inventory on their premises, or even in home garages.


As a business grows, this is less likely to be viable. It may also put inventory at high risk of theft or damage.


A challenge for small businesses is finding suitable storage space. It can be difficult to get warehouse space that’s the right size, that’s properly secure and that won’t break the bank.


Especially for a small business, it can also be risky signing a long lease for warehouse space of a fixed size.


What we offer at XtraSpace

At XtraSpace, we don’t provide expert small business inventory management advice or services.


What we do offer is clean, secure self-storage units, ideal for storing inventory. Our storage units are available in a wide range of sizes (from 2 m2 right up to 1000m2, depending on location) and are available on flexible terms.


We also offer affordable warehousing space, at various locations in Gauteng and in Pietermaritzburg. There’s no need to commit to a long lease – pay for as short a period as one month.


Contact us for more information or browse to find a branch near you.

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