An effective business inventory management strategy is essential for any company that utilizes spare parts—whether for production or asset maintenance. By keeping an organized inventory of the parts, tools, and resources needed most, businesses of all sizes can increase efficiency, reduce downtime, and lengthen asset lifespan.
In this article, we’ll provide an overview of inventory management for small businesses, including how it works, common challenges, and tips for managing small business inventory and stock control.
What is inventory management?
Inventory management is the process of organizing and monitoring parts, products, or other stock of items efficiently. A good inventory management strategy is a priority for many types of organizations from small retail businesses to large corporate entities.
Inventory management is especially important for businesses that keep a stock of spare parts for maintenance and production. It helps organizations keep track of spare parts, effectively plan for reordering, quickly find and use parts when needed, and ultimately keep operations running smoothly.
How does inventory management work?
Effective inventory management helps companies stay organized and provides data to help manage stock levels. It may look different from company to company, but the basic steps consist of the following:
- Taking stock of current inventory levels. Make a categorized list of all the spare parts in your organization’s inventory.
- Systematically organizing your spare parts room or counter. Ensure that priority parts are easy to find and access and that the oldest parts are used first.
- Keeping a bill of materials (BOM). Include instructions for each spare part in your inventory.
- Developing standard operating procedures (SOPs) for your inventory management plan. Ensure that all involved employees are trained on the plan.
- Monitoring and tracking inventory levels. A cloud-based solution can provide efficiency and access to critical information and data.
- Ordering new inventory when stock is low. Regularly review and adjust when to reorder based on consumption rates and lead times to maintain optimal inventory levels.
While inventory management can be much more involved than this, particularly if your organization holds a more extensive stock of spare parts, these basic steps will help you begin to implement a thoughtful strategy.
Why is inventory management important?
Inventory management may seem like a low priority, but having the right inventory available at all times can support several workflows and outcomes within an organization:
- Improved productivity
- Better planning and resource forecasting
- Improved asset lifecycle and longevity
- Resource efficiency
- More effective and efficient workflows for purchase orders
- Better customer satisfaction
An effective and streamlined inventory management system contributes to an effective maintenance strategy. By maintaining a sufficient, yet not wasteful, stock of spare parts and keeping them organized, organizations can better manage and maintain their assets and replace parts on schedule.
Challenges of inventory management for maintenance teams
Like most internal strategies, inventory management is not without its difficulties. In order to do it well, maintenance teams must take strides to prevent and overcome the following challenges.
Forecasting and getting inventory levels right
Forecasting without the right tools can be a daunting task. Managing inventory levels to ensure the company always has the parts available for any given task is crucial for proper inventory management. But maintaining too much inventory can be a wasteful use of space and money, especially for small businesses where space and resources are at a premium.
Managing inventory during a supply chain crunch
When supply chain demand changes, it can create challenges for inventory management. Supply chain issues make it difficult to keep stock of the parts you need. Keeping stock levels up is important. It’s also helpful to have a trusted supplier who can meet your organization’s needs.
Limited visibility to inventory
Without an organized inventory management strategy, maintenance teams may have limited visibility into the company’s inventory. Limited visibility can lead to reordering parts already in stock, creating storage issues and impacting profitability.
Inefficient inventory and warehouse management processes
Many of these challenges stem from a poor or inefficient inventory management process, but that is also a challenge in itself. An inefficient inventory management process makes it difficult for maintenance employees to do their jobs, impacting productivity, profits, asset longevity, employee safety, and more.
Identifying incorrectly located material
Poor inventory management practices lead to raw materials and spare parts being placed in the wrong locations. When this occurs, it prolongs regularly scheduled maintenance tasks as employees work to locate the misplaced materials.
Managing inventory waste and defects
One aspect of inventory management is identifying waste or spare parts that are expired or no longer effective. In this same boat, when supplies are received, some parts may be defective and unusable.
It is critical that organizations account for the management of waste and defects in their parts inventory with an organized and thoughtful process.
Lack of centralized inventory hub
Organizations should keep a centralized hub to store and manage spare parts for effective inventory management. Without a hub, parts become difficult to track down, creating delays in maintenance tasks that contribute to unplanned production downtime.
Understanding the challenges, following inventory management best practices, and creating an effective inventory management plan can help your organization identify and fix these problems.
Top inventory management techniques
The best inventory management plan combines strategies that streamline parts tracking and use data for better decision-making.
Accurate forecasting with data
Forecasting is a crucial part of an effective inventory system. By taking parts usage history into account along with maintenance and repair plant, organizations are able to forecast parts needs much more accurately. A forecasting solution allows maintenance managers to make informed decisions when managing and ordering spare parts. This strategy is most effective when used with capable spare parts management software.
Just-in-time (JIT) inventory management
JIT is a lean manufacturing method where inventory levels are kept at the minimum necessary. At its extreme, this method involves suppliers delivering spare parts to be used right when needed, eliminating the need for large spare parts storage.
However, it is wise to keep this process in balance with your needs by keeping minimal spare parts storage, particularly for your most critical or frequently used parts. If you plan to use the JIT method, this can help ensure you don’t face unplanned downtime if timelines are missed.
First-in-First-Out (FIFO) method
The FIFO method for parts management ensures organizations use older spare parts first and that these parts don’t sit in the back of a storage room collecting dust until their expiration date has passed. Categorize and prioritize parts by the dates on which they are received.
Inventory management software can help companies organize and ensure that parts are used according to this method.
ABC analysis for prioritizing types of inventory
ABC analysis is a method for prioritizing spare parts based on their importance, value, and usage.
- A items typically represent 20% of the total number of spare parts but contribute to 80% of the total inventory value. Generally speaking, these are frequently used critical spares that cost more and require tight control and accurate forecasting.
- B items make up about 30% of your spare parts quantities on hand and contribute 15% of the total value. These items are moderately important and demand balanced inventory control methods.
- C items comprise 50% of spare parts but only contribute 5% of the total value of the inventory. These parts are generally low-cost, non-critical spares that can be managed with more relaxed strategies.
Cloud-based inventory management software
Spreadsheets won’t cut it anymore. Companies that utilize cloud-based inventory management software are able to create much more sophisticated and effective inventory management programs. These solutions help streamline work orders and parts management and utilize data analysis to provide more accurate forecasting of inventory turnover.
Barcode inventory tracking system
A barcode inventory tracking system offers an efficient solution for identifying parts and managing stock levels accurately. Barcode scanning technology allows companies to swiftly identify items reaching low stock levels, enabling timely restock to avoid supply disruptions.
Key features of effective inventory management
Inventory management is most effective when it is supported by the following key features:
- Real-time tracking and monitoring: Tracking parts use in real-time allows for more accurate ordering notifications and forecasting to ensure stock levels are replenished and keep up with demand.
- Supplier management: A strong inventory management strategy effectively accounts for suppliers’ lead times, workflows, and reliability to meet parts needs.
- Inventory management technology: Innovative technology is available to help companies manage their spare parts. These systems often include automation of workflows, notifications, and documentation.
- Integration with other business processes: A good inventory management system will use software that offers integrations with other systems, such as CRM, accounting software, and sales channels that meet your business needs.
- Training and documentation: To ensure consistency and accuracy, it is essential to document and train personnel on inventory management procedures.
Best inventory management software and technologies
Technology goes through frequent innovation to meet the evolving demands of businesses. Software solutions and inventory management tools allow manufacturing and industrial facilities to enhance all areas of their operations, including parts inventory.
Take a look at some of the technologies that support proactive inventory management:
RFID and barcode technology
Radio frequency identification (RFID) and barcode scanners both use scanning technology to help identify, manage, and keep track of spare parts. These technologies use an SKU (stock keeping unit) to quickly identify parts in a digital system and automatically update inventory levels.
Automated solutions
Monitoring spare parts can quickly become monotonous and prone to human error. Automated solutions help streamline the more mundane aspects of parts management, like keeping inventory counts, updating BOMs, generating reports, and order management.
Computerized maintenance management systems (CMMS)
A modern Computerized Maintenance Management System (CMMS) will incorporate the above solutions and integrate them with other aspects of equipment and facility maintenance programs. This technology is designed to hold a wealth of information, including work orders, maintenance schedules, parts inventory, and vendor lists. Centralizing this data assists maintenance teams in effectively managing their operations and spare parts inventories.
Additional capabilities of a CMMS include:
- Asset management
- Real-time monitoring and inventory data reports
- Tracking maintenance history
- Easy communication with teams
- Mobile maintenance app capabilities
- More visibility and transparency
Enhance your inventory management strategy today
Limble CMMS is available to help small business owners improve their inventory management strategies. With automated solutions, streamlined communication, and a centralized hub for data collection, Limble CMMS enhances operations and employee satisfaction.
Contact us or give our free demo a try to get started.
