Best inventory management strategies and how to develop your own

Managing inventory in the beauty industry can be a challenging task for business owners and managers, especially if you have multiple sales channels and locations. Effective inventory management is crucial to increase sales, boost profits, and provide excellent customer service. To achieve this, you need to adopt an inventory strategy that suits your business needs. In this article, we will discuss ten of the most effective stock management strategies for beauty businesses and provide inventory management tips on creating a customized one.

What are inventory management strategies exactly?

Companies that make skincare and cosmetics, which have complicated production processes, face challenges keeping track of their inventory. This includes everything: ordering, keeping, tracking of products, and beyond. To address these challenges, inventory management strategies can be employed.

Inventory management explained

Inventory management is very important in the beauty industry to make sure things run smoothly, products get to customers on time, and customers are happy. A good inventory strategy for beauty services involves keeping track of the flow of products from the point of purchase, through production, storage, and delivery.

For instance, if you run a hair salon, managing your inventory requires a systematic approach. The inventory management process typically involves the following stages:

1. Purchasing: acquiring hair products, equipment, and supplies needed to provide your services.
2. Usage tracking: monitoring the amount of products used for each client and keeping track of the quantity of products remaining in stock.
3. Replenishment: restocking your inventory to ensure that you have sufficient products and supplies to provide your services.
4. Sales: delivering services to customers and processing payments.
5. Reporting: monitoring sales, tracking inventory levels, and calculating revenue per service.

By adopting a comprehensive inventory management strategy in the beauty industry, you can maintain optimal inventory levels, reduce waste, and increase profitability. It also helps you ensure that you have enough products and supplies to meet customer demand, so you can deliver your services with confidence.

The most common inventory management strategies and techniques

Stock management is a continuous challenge for most companies. Nevertheless, its implementation can improve efficiency and increase revenue significantly. Here are 6 inventory strategies to consider for a beauty business.

Minimum safety stock

In order to ensure continuity of supply, businesses typically use safety stock to buffer against unforeseen delays in the supply chain. To determine the amount of safety stock needed, a simple formula can be employed based on the predicted future sales and lead time of orders: (Maximum daily usage x Maximum lead time) – (Average daily usage x Average lead time). It is important to note that safety stock should be used for an interim increase in demand and not for additional inventory for an entire year.

ABC inventory analysis

This method divides goods into three categories to identify items that have a significant impact on total inventory costs:

• Category A is made up of your most valuable products, which contribute the most to overall profit.
• Category B products are those that fall between the most and least valuable.
• Category C comprises small transactions that are essential for overall profit but not as influential on their own.

Backordering

Backorders can have a significant impact on a company's inventory control processes. When customers place an order for inventory stock that is not yet available, it can lead to logistical and inventory control issues. Businesses must be able to keep track of their sales orders with backordered items, place purchase orders for the items, and then match usage to the correct purchase order to fulfil them.

Economic order quantity model

The Economic Order Quantity model is used to identify the optimal order quantity that a company should purchase in order to minimize the costs associated with purchasing, holding and other associated costs. Factors such as total production costs, demand rate and other relevant variables are used to determine the optimal order quantity.

First-in, first-out (FIFO)

Popularly applied for products that have short shelf-life period, FIFO is a warehousing stock inventory management strategy that functions as it sounds, with the first items to enter a warehouse being the first to leave. This system is designed to keep inventory valuation high by preventing stock from becoming obsolete or expired. Extensive Order Manager's inventory system natively provides a comprehensive view of FIFO costs, shipping fees and other daily operations across multiple reports.

Consignment

This technique allows purchasing products without upfront payment. The supplier remains the owner of the goods, and the business pays for them only once they are sold or used. While this type of inventory strategy may sound advantageous, it also carries significant risks. In addition, it requires accuracy and a sophisticated tracking system.

Developing an inventory management strategy for your business

Having reviewed these management of inventory techniques, it is possible to create an effective inventory strategy. Use the steps we provide below and create the most suitable strategy for your business.

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Choose a storage space for inventory

It's important to create an organized and easily accessible storage space within the salon to ensure the efficient use of products. Consider designating a specific area to store inventory and equipment, ensuring it's easily accessible to the staff who need it. You may want to invest in storage solutions such as shelves, drawers, or cabinets to keep products organized and visible. To maximize convenience, store frequently used products in areas that are easily accessible and within arm's reach. This will help streamline daily operations and ensure that products are used efficiently. Regularly assess your inventory and consider restocking before items run out to avoid unnecessary downtime or loss of revenue. By prioritizing organization and accessibility, beauty business managers can increase efficiency and improve the overall customer experience.

Select an inventory software program

Small businesses typically start with spreadsheets to manage their inventory, but it leads to mistakes and great effort and time. The better way to gain greater control and efficiency is by using inventory management software. It allows managing their supply chain and order processes better. Suplery is a free solution that has proved its efficiency to many businesses. And it is the best way to organize inventory both for small salons and wide chains.

Finalize an agreement with suppliers

Once you've selected your suppliers, complete an agreement detailing your shipping and payment schedules. Furthermore, set aside time to discuss your timetables with them. Upon submitting a purchase order, ensure the supplier commits to an estimated turnaround time for when the order is expected to arrive at your warehouse. If you find a product is not selling well, it may be more cost-effective to return it to the supplier. For this to be possible, however, you must have a returns agreement in place.

Think about how to get rid of excess inventory

Dead stock can incur high carrying costs and may not always be eligible for return to the supplier. By donating excess inventory to a non-profit or charitable organization, businesses can receive a federal tax deduction and prevent the competition from buying and reselling the stock.

Set a reorder point

No matter if a business is new or established, having enough fresh products to replace those sold can be a crucial part of the workflow. Without it, customers can be lost, and long-term buyers may be put at risk. To avoid this, you should set a reorder point and keep safety stock on hand. The reorder point should be based on past market demand, average turnaround time, and lead time, which inventory software can provide quickly.

Analyze the results and improve your further forecasting decisions

Strategic inventory management is key to success in e-commerce, and monitoring the right metrics can help you make better forecasting decisions. By keeping tabs on five key indicators, such as inventory turnover, gross margin percent, customer order fill rate, costs of carrying, and average sell-out days, you can ensure your inventory remains balanced, avoiding overstock or deficit and safeguarding your business's bottom line.

Order products and manage inventory effortless with suplery

Inventory management can be a complicated and time-consuming process. But with Suplery, it’s quick and effortless. You can order and view all your products in one place and easily track stock levels and order history. You can also set up custom alerts to let you know when stock is getting low. This ensures that you’re never out of stock and that your customers get what they need when they need it.

When it comes to ordering products, Suplery is the most suitable platform. It allows you to customize your orders to suit your needs and get real-time notifications when orders are placed, shipped, and delivered.

So if you’re looking for a way to manage your inventory and order products effortlessly, look no further than Suplery. With its powerful and easy-to-use system, you can save time and money while ensuring that your customers always get what they require.

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Final thoughts

Developing an effective inventory optimization strategy is an iterative process tailored to each beauty business. There are a number of considerations to keep in mind. With Suplery, you can streamline and automate functions, distribute costs and resources efficiently, and gain valuable insights to inform business decisions. Transform your business with Suplery today.

FAQ

What is an inventory management strategy?

An inventory management strategy involves creating processes and systems to manage the movement of products through the supply chain, from production and procurement to storage and distribution.

What is inventory management?

Inventory management entails the monitoring and controlling of inventory levels to ensure that a company has the right amount of stock at the right time and place. This includes ordering, storing, using, and selling inventory, as well as the management of products.

Which are the most popular inventory management strategies?

The list of the most renowned inventory control strategies is provided and described above in this article.

How to develop an inventory management strategy?

Start by selecting a location for inventory and an inventory software program, finalize an agreement with suppliers and determine how to dispose of excess inventory. Next, establish a reorder point and analyze the results and use them to inform future forecasting decisions.