Running an apparel business can be extremely profitable, but it is important to have a good inventory management strategy in place to be successful. If you don’t have the right amount of stock, or if you don’t have the right type of stock, then you’ll likely lose money. Even worse, you can lose your competitive edge, which can damage your business’s reputation and make it difficult to stay relevant in today’s fast-paced retail environment.
If you’re not sure what type of inventory management strategy to use, don’t worry! Here, we will discuss 9 types of inventory management strategies that you can use in your business. Are you ready to learn more about inventory management strategies? Let’s get started!
What is an Inventory Management Strategy?
An inventory management strategy refers to the various methods and techniques used by businesses to track and manage their stock levels. They function by organizing and streamlining the various processes involved in inventory management, such as ordering, storing, and allocating goods. If inventory management software is used, it typically tracks the movement of goods in real time. Having a system like this benefits from being integrated into platforms like sales channels, financial systems, CRMs and transportation systems, especially for large-scale apparel enterprises.
9 Types of Inventory Management Strategies You Can Use
There are many different types of inventory management strategies that you can use in your business, including:
1. Inventory Tracking Spreadsheet
This is one of the most common methods used to track inventory levels, as it is relatively simple and straightforward to implement. With spreadsheet-based tracking, businesses usually create a database or template where they can enter their stock levels and inventory needs, which they can then use to assess and analyze trends in their business. There is risk involved with this method since it isn’t as accurate as software systems that track and report inventory movements in real-time.
2. Economic Order Quantity (EOQ)
The EOQ method of ordering was developed by Ford W. Harris in 1913. This strategy is typically used for perishable goods with a high cost-to-value ratio. This strategy is all about determining the number of units you must order at any given time while minimizing holding, order, and shortage costs.
To calculate EOQ, you will need to know the demand rate and set up and holding costs. The formula used for it is EOQ = square root of [2(setup costs)(demand rate)] / holding costs. There is inventory management software that has EOQ baked in. This system can also send alerts when the threshold is reached so that you can place an order quickly.
3. Just-in-Time (JIT)
Businesses use JIT to manage their stock levels, particularly when it comes to large-scale enterprises. With a just-in-time inventory management system, companies only order and receive the exact amount of goods needed to avoid overstocking or running out of stock. This helps reduce costs and keep inventory levels stable, which benefits businesses in highly competitive industries like the apparel industry. Managing a JIT system can be challenging when there are supply chain issues, as there will be delays in getting new stock.
4. Enterprise Resource Planning (ERP)
An ERP system with an inventory management system built in can help you streamline and automate your inventory management processes. This type of software integrates all aspects of your business, from manufacturing to sales, allowing you to manage your stock levels in real-time, predict future needs and make changes as needed. For instance, N41 ERP software for the apparel industry allows businesses to get real-time data on their stock and sales, automate manufacturing processes with cutting-edge technology, manage logistics and supply chains, and more.
5. Forecasting Models
Another important type of inventory management strategy is forecasting models. These models use historical data to predict future sales trends, which can be used to help inform ordering decisions. There are many different types of forecasting models, including simple moving averages, exponential smoothing models, causal models and others.
6. Mobile Technology
You can take advantage of mobile technology to help manage your inventory. With a mobile app that syncs with your ERP system, you can easily input and track new orders on the go, as well as review existing stock levels and set reorder points for any products in your inventory. This will help ensure that you always have the stock you need when you need it, and prevent overstocking or running out of critical supplies.
7. Warehouse Pick Ticket Template
As a big part of inventory management strategy, it’s always ideal to optimize your order-picking operations. A pick ticket is a list that tells warehouse operatives what products to pick from and where they’re stored in the warehouse. A good warehouse pick ticket template will include all the necessary info such as product IDs, quantity per SKU and location, for example.
A good pick ticket will also be easy to read, so it’s a good idea to opt for a template that uses a clear and concise format. Additionally, inventory management software can help optimize picking routes and act to supplement pick tickets for streamlining your operations.
8. FIFO and LIFO
Another key aspect of inventory management strategies is choosing the right accounting method for your business. There are two primary methods used in practice today: FIFO (first-in, first-out) and LIFO (last-in, first-out). With the FIFO method, products are sold in the order that they were received, while under the LIFO method, products are sold in the order that they were produced.
FIFO and LIFO are good for businesses with seasonal and fast-moving products, as it helps minimize the likelihood of overstocking and out-of-stock situations.
9. Material Requirements Planning (MRP)
Another popular inventory management strategy for businesses in the apparel industry is MRP. This involves creating detailed plans of how much raw material you need to produce a set number of finished products, and when you will need it. With an MRP system, you can plan your production schedules well in advance and ensure that you have all the necessary materials on hand when you need them.
With MRP tracking, it’s also good to have a clothing manufacturing cost sheet because it will help you track the cost of your production process accurately. There are companies like Techpacker that make nice clothing manufacturing cost sheet templates you can use.
How N41 ERP Can Help
N41 is a leading provider of ERP software specifically designed for the apparel industry. From forecasting to purchasing to production planning and more, N41 can help you to get the most out of your inventory. With our advanced tools and features, you can streamline your operations, reduce costs, and improve your bottom line. So if you’re looking for the best way to manage your inventory, look no further than N41 ERP. You can contact us at (213) 738‐1010 to get started or schedule a free demonstration today to learn how we can help your business succeed.