Wasp Barcode Technologies: The Barcode Solution People

Managing Inventory during the Holiday Season

managing-holiday-inventory-banner It doesn’t matter if you sell shovels or phones, during the holidays a lot of goods are flying out the door. Making a list and checking it twice makes sense for small business owners managing inventory during the holidays—otherwise known as a physical inventory audit. Rachel Ann Austin draws inspiration from vintage maps. She started collecting them and soon found herself drawing and painting all over them. What was a hobby soon grew into a career. Working from her basement in Portland, Oregon she sells, creates, packages, distributes, and orders supplies. Rachel is very neat and orderly, with everything in its place, and the holidays are a busy time for her. While working on a new line, she also displays her artwork at shows like Crafty Wonderland, ships cards and posters, and accepts commissioned work.  Rachel is working 12 to 14 hour days during the holiday crunch. She uses QuickBooks to assist with inventory and accounting. For the most part, Rachel creates on demand. Her product line includes card sets, single cards, 11 x 14 prints, and original paintings. She has 70 finished original paintings sitting on a shelf in her basement — her internal inventory audit. She doesn’t seem worried that they won’t sell or lose their value.  Bottom line?  With virtually no overhead and no employees, Rachel is in charge and in sync with her definition of profitability: more money coming in than going out. “Many small businesses enter into inventory issues as a set of individual problems to solve,” offered productivity consultant Don Benson. “It takes a while for them to move to the systemic level to think about how to create and maintain an accurate perpetual inventory reporting system or inventory audit procedure — a system that will deal with inventory in each step in the flow from receiving to shipping.” “For our practice, we really couldn’t see any inventory patterns until we had been in business for about four years,” said Casey Aron, Golden Cabinet Herbal Pharmacy & Acupuncture Clinic. Now, we anticipate the busy season, which for us is in October and know that people have more time to take care of themselves around the holidays. In the future, barcodes could work well for regular auditing.” In contrast, for larger retailers like J.C. Penney’s, control of inventory is critical during the holidays. Many considerations go into knowing what will sell and how much is needed to stock. It’s a time to get rid of slow or non-selling inventory through the process of write-downs. Consultant Robby Slaughter tracks his inventory monthly. He doesn’t use any type of software or spreadsheet because his company doesn’t have enough items for this to be significant, but he agrees that tracking inventory is more challenging as the holidays approach because orders tend to increase and time tends to be more crunched to manage inventory.  Forecasting is difficult. Slaughter’s team looks at past years’ order histories to get an estimate. They don’t want to keep too much on hand, but they also don’t want to get back ordered. When comparing the inventory practices of small businesses with huge companies like Whole Foods, Slaughter believes the problem is entirely different. “Big retail companies have to deal with theft, which often isn’t a problem for small businesses — especially those that don’t give the general public access to their inventory. These companies can also move products between stores to deal with regional demand. And they have marketing budgets that can help to move inventory by running specials or other programs,” said Slaughter. J.C. Penney recently used this strategy – the extreme write-down – to bring customers into their stores.  Their hope was to clear out old merchandise and avoid writing off millions of dollars in non-selling inventory.  Additionally, if customers were enticed through Penney’s doors by substantial write-downs, those customers were more likely to purchase other items.  Penney’s pre-holiday strategy began well before Black Friday. Here are two strategies retailers use to protect themselves.

Inventory Reserve

iStock_000052027484An inventory reserve refers to the protection used to account for an item not sold at its cost due to deterioration in value. This type of entry is used on a balance sheet to show earnings deductions in the worth of inventory items. This practice helps small businesses estimate their organization’s losses, and then set aside money in anticipation of these losses.

Dealing with Shrinkage

Shrinkage is a nice way of explaining lost, stolen, or misplaced items. Suppose a supplier short changes you on an order.  Who are you going to believe – their  invoice or your own eyes? One solution might be a perpetual system, fully automated, which captures every movement of inventory from receiving docks to the sales register using barcode scanners or mobile devices. The goal is to know where the inventory is sitting, but a determined thief can “trick” one of these systems. Instead, do a physical count. The downside is a process that takes time away from production and may require extra personnel.  A good compromise is cycle counting – counting a small amount of inventory every day until entire inventory  stock is cycled through.  Once all inventory is counted, the process starts again from the beginning. Whether you’re an artist, a manager of parts in a small garage, or in any position requiring control of inventory, here are four tips to help finish the year productively and start next year on solid ground:
  • Review your goals.
  • Refresh your business. Update your website, documents, catalogs for relevancy and accuracy.
  • Begin forecasting.
  • Conduct an inventory audit. Verify what’s in stock. Note obsolete or damaged inventory and reduce valuation.
Interested in learning more about inventory tracking?  Visit Wasp Barcode Technologies to request a free Inventory Control demo.