The ultimate guide to inventory flow

Imagine that your inventory is a river that flows through your business. Just like a river, your inventory has to flow smoothly — otherwise, it will flood the landscape around it. 

Whether you’re a seasoned business owner or just starting out on your entrepreneurial journey, understanding your inventory flow can make a world of difference. Read on for our ultimate guide to keeping your inventory flowing smoothly!

What is inventory flow?

Inventory flow is the movement of your products through all the different stages of your business, from procurement all the way to production, storage, and finally, the sale.

Think of it as the lifeblood of your business. It means that your goods are always available, as and when you need them. Staying on top of things will help you keep the exact right balance of stock so that you can avoid costly shortages and surplus errors. 

Why is inventory flow important?

So, why should you care about your inventory flow? Here are the main reasons why you should make it a priority for your business:

1. It makes your operations efficient — Keeping a smooth inventory flow means that all your products can move easily from one stage to the next. Doing this can help you reduce any delays and bottlenecks in your current business practices. 
2. It keeps your customers satisfied — Keeping your inventory flowing smoothly allows you to fulfill all your customer orders quickly and more accurately, so your customers stay happy. 
3. It improves cash flow — Optimizing all your inventory flow means far less money is tied up in stock. That way, your cash is free to be spent on all your other business needs. 
4. It makes it more scalable — A well-designed inventory flow system lets you scale your business far more easily as you continue to grow. You can do all this without sacrificing efficiency.

Inventory flow challenges

Managing inventory flow isn’t exactly a walk in the park. There are some common things that businesses face as a roadblock, including the following.

1. Demand variability — Customer demand will fluctuate now and again, which can disrupt industry flow and either lead to stockouts or too much inventory. 

2. Disruptions to supply chains — Delays from your suppliers or issues with transport can halt the flow of goods, which can lead to hiccups down the line. 

3. Complexity — Managing inventory flow becomes complex if you have multiple locations or lots of different product lines, all manufactured using different processes. 

4. Integration with existing technology — Combining all your different systems and technologies to manage the flow of your inventory is almost impossible without some careful planning. 

5. Human errors — Mistakes in your data entry, and even picking and packing, lead to discrepancies in your industry numbers, which will go a long way towards disrupting your flow. 

Inventory flow strategies and examples

If you’re ready to tame the inventory flow beast, here are some strategies to help you optimize your business processes.

Just-in-time (JIT) inventory 

JIT inventory management is all about ensuring your products are ordered and received exactly when you need them. This helps to lower your holding costs to minimize the risk of overstocking. 

Toyota does this perfectly. They use JIT, so parts and materials arrive just in time for assembly to reduce their overall waste. 

ABC analysis 

ABC strategies involve categorizing your inventory into three groups. These are: 

• A: High-value items with low sales frequency
• B: Moderate-value items with a moderate sales frequency
• C: Low-value items with a high sales frequency

Then, you can start focusing on your A items to better manage the flow of your inventory. Let’s say you own a retail store and you want to improve your profits. You might prioritize restocking electronics (A) over clothing accessories (C).

Cross-docking 

This technique is all about unloading your goods from inbound trucks and loading them straight onto your outbound trucks to lower the time products spend sitting in storage. 

Walmart does this perfectly, using cross-docking to streamline its distribution and keep its storage costs as low as possible. 

Safety stock

Setting up a buffer with safety stock will help you and your business mitigate the impact of demand variability, which can disrupt your supply chain. 

A pharmacy, for instance, might keep some extra stock of popular medications so that customers can always get what they need, even during unexpected spikes. 

Demand forecasting

Using advanced analytics and historical data, you can even predict how much future demand your product will have, so that you’re never short or miss out on sales. 

Inventory flow phases

Inventory flows in five phases, so let’s take a closer look at the process below.

1. Procurement 

The very first phase is when you acquire raw materials or finished goods from your supplier. You need to do this quickly to ensure delivery is timely and that it flows smoothly into your inventory system. 

2. Production

Raw materials eventually turn into your shiny finished products. You should work hard to streamline your production process so you can help maintain a rapid flow of goods. All this will lead to shorter lead times and happier customers.

3. Storage 

After your products are finished, they’re stored in your warehouses and stockrooms. You should take the time to properly organize your inventory with labels and boxes so you can count your inventory accurately every time. Then you can actively avoid stockouts or overstocking. 

4. Distribution 

It’s time to start moving your goods from storage to either your points of sale (your shop) or directly to your customer’s homes. At this storage you need to make sure you have the right distribution channels put in place so deliveries go out on time and your customers don’t have to wait for weeks on end. 

5. Sales

You’ve made your sales, congratulations! In th is very final stage, you need to keep your inventory records accurate as the checkout processes. Your inventory should be updated in real time to avoid any confusion or issues on your end. 

Optimize your inventory flow with Katana

Taking control of your inventory flow can feel stressful. There’s so much to remember, and it’s almost impossible to do it with a pen and paper. With Katana, you can streamline your inventory flow, keeping your business running smoothly even when you reach unforeseen bumps in the road. 

Katana provides real-time visibility into your inventory, automated stock updates, and integration with all your existing systems. Whether you’re managing raw materials or trying to ship out your finished products, Katana’s intuitive interface and features make it easy to stay on top of your inventory flow. 

With Katana, you can: 

• Track inventory automatically and in real time 
• Automate all your reorder points to prevent any stockout issues 
• Streamline your production processes for extra efficiency 
• Integrate with your other technologies like ecommerce and shipping 
• Generate far more detailed reports to make the right decisions. 

Don’t wait. Book a demo to see how you can optimize your inventory flow with Katana and take your business to new heights!

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