A quick guide to inventory strategy

Welcome to the fascinating world of inventory strategies! Think of your inventory as the treasure chest owned by your business — if you look after it well, you’ll enjoy riches and spoils. But, without a proper strategy in place, you might find yourself positively lost in the sea of stockouts and overstock. 

Become an adventurer and explore our inventory strategy guide below. We’re going over what a strategy might look like, why you need to use one, and how to find the best strategy that works for you. 

Ready to set sail? Keep reading. 

What is an inventory strategy?

An inventory strategy provides a roadmap for properly managing your stock. It’s a set of guidelines that helps to optimize the flow of your goods through your business. In simple terms, it’s a plan for ensuring that you always have the exact right amount of products at the right time and in the right place. 

A salient inventory strategy will work to help you navigate the complexities of supply and demand to help you minimize costs and improve how efficiently your business runs. 

Why do you need one?

So, should you actually bother with implementing an inventory strategy for your business? We think you should, and here’s why.

1. Keeps you efficient 

A well-made strategy works by streamlining your business operations. It helps you reduce the amount of time and effort spent on managing your inventory so that you can focus on the more important stuff. 

2. Save on costs 

Optimizing your stock levels in real time helps you avoid the costs of overstocking and stockouts. 

3. Help your customers stay satisfied 

If products are always available when your customers need them, they’re far more likely to come back for more — they know you’re reliable. 

4. Stay competitive 

Having a smart inventory strategy gives you an edge over your competitors by improving how rapidly you can respond to market changes. 

5. Manage your risk levels

Taking the time to develop a proper inventory management strategy will reduce the risk of any financial losses. You’ll be able to see the exact state of your industry at all times. You can check for missing items. 

5 tried-and-true inventory strategies to apply to your business

Ready to dive into the choppy seas of inventory strategies? We’ve gathered five options below that can work wonders for your business.

1. Inventory management automation

Automation is the secret sauce behind modern methods of inventory management. Leveraging burgeoning technology helps you to automate your most repetitive tasks, like tracking your stock levels and generating reports. It can even place orders for you!

Automated systems work to reduce the chance of human-made errors and save you time in the process. Katana’s inventory management software can help you automatically update your stock levels in real time, giving you a much clearer picture of the status of your inventory. 

2. Real-time inventory features

Real-time inventory tracking gives you a live feed of your stock levels. It gives you the opportunity to monitor all inventory movements as they happen so that you can get instant updates on stock quantities. 

This is a particularly great feature if your business has high turnover rates or if you’ve diversified into multiple sales channels. With a real-time tracking feature, you can prevent both stockouts and overstocking. 

3. Accurate reorder points

Reorder points are the levels at which stock needs to be reordered to avoid it from running out. Setting accurate reorder points is essential for maintaining the most optimal stock levels possible. 

To determine the right reorder point, you should consider factors like lead time, demand variability, and your safety stock. Automating reorder points guarantees you reorder products at the exact right time. This prevents shortages and any excess inventory from collecting dust on your shelves. 

4. Safety stock inventory

Safety stock acts as a buffer against any unexpected spikes in demand or disruptions to your supply chain. While too much safety stock can tie up your capital, too little can lead to stockouts — a costly error. Finding the right balance is key, so you should calculate your safety stock using average lead time and demand variability. 

5. Demand forecasting  

Think of demand forecasting as having a crystal ball that shows you all your inventory needs. Analyzing historical data and market trends means you can predict any future demand and then adapt your inventory accordingly. 

Demand forecasting helps you make decisions about your stock levels and production schedules. Katana’s planning and forecasting features can help you accurately predict your demand so you always have the right amount of stock ready to go!

How to create your own inventory strategy 

Your inventory strategy needs to fit your business like a glove. One strategy might work for one business but not another one. That’s why it’s important to make your own strategy tailored exactly to your needs. 

Here’s how to create your own inventory strategy in six easy steps: 

1. Assess the unique needs of your business — Start off by evaluating what your business needs out of an inventory strategy. Consider factors like the type of products you sell, your sales volume, and your lead times. 

2. Set clear and attainable goals — Define what you want to achieve with your inventory strategy. Your goals might include anything from reducing your holding costs to minimizing your stockouts. 

3. Analyze all your existing data — Gather and analyze data on sales and inventory levels. You can then use this information to identify trends and make better decisions. 

4. Choose the right strategies — Find the inventory strategies that align with your overall goals and business model. Try to combine all your different strategies to create a more effective plan. 

5. Implement technology — Investing in inventory management software like Katana can streamline your business processes to improve your accuracy. Katana can also integrate with other systems like your accounting and sales platforms. 

6. Monitor and adjust your strategy — Continuously monitor the performance of your inventory and find areas where you could improve on your chosen strategy. This will mean that as your business grows, your inventory grows with you.

Common challenges of inventory strategies

Even the most carefully laid out plans can face some hurdles. You may face challenges like: 

• Inaccurate data — The wrong data can lead to you making the wrong decisions regarding your inventory.
• Supply chain disruptions — Delays in your supply chain can throw off your inventory strategy.
• Fluctuations in demand — Sudden changes in demand can be hard to predict and manage.
• Human errors — Mistakes in data entry and counting will lead to discrepancies.

Craft a winning inventory strategy with Katana

Crafting your own killer inventory strategy takes time to get right. Katana is here to bring your ideas to life. Our powerful inventory management software offers a suite of tools that can optimize every aspect of your inventory strategy.

Features like real-time tracking, automated reorder points, and demand forecasting mean Katana takes the guesswork out of your inventory management.

Ready to craft your own winning strategy? Sign up for a demo of Katana now and watch your business grow to new heights!