5 Inventory Management Hacks for Small Manufacturers

You may think that managing inventory is just a piece of cake. But as your business continues to boom and demand for your product skyrockets, you’ll find yourself dealing with growing pains. There are plenty of companies that have lost billions or even gone as far as closing their shop due to inventory mismanagement. Take, for example, Walmart, who burned $3 billion because of its out of stock issue, or even H&M, who struggles to unload more than $4 billion in excess store inventory.

However, for small manufacturers, these inefficiencies and inaccuracies aren’t just costing you money; they can impact how everything runs and ultimately how customers perceive your business. Generally, most small workshops find themselves encountering issues in overbuying or running out of raw materials needed for production. They can’t seem to manage, find the right inventory to hold, and determine what is actually needed by the manufacturing line. Some find themselves underestimating the amount of space they need to handle raw materials, work-in-progress, and finished goods. Even basic issues like monitoring correct inventory levels can be a challenge as most small manufacturers still rely on outdated and unreliable systems for monitoring supplies.

Small productions can avoid these problems by implementing proven strategies. These strategies can help them remain profitable and keep a competitive edge.

Before we get there, we need to understand first what inventory management is.

What is Inventory Management?

Inventory management is the art and science of dealing with storing, tracking, managing, and ordering inventory or stock from your supplier to your retail outlets. It’s end to end – starting with the moment you ordered raw materials until the product lands in the hands of the customer.

With a large amount of money tied to this, businesses will need to use a variety of tools and techniques to manage this feat. This helps you avoid some serious production and logistics issues like:

  1. Mounting storage costs
  2. Increasing unsellable dead stock – similar to what is happening to H&M
  3. Spoiled products (if they come with an expiration date)
  4. Missed deliveries and delayed turnover
  5. A large volume of order cancellations

If you want to avoid any unnecessary expenses and improve your cash flow, inventory management is the key. Below are the 5 hacks that can help you do that:

The 5 Inventory Management Hacks

1. Track Your Supply and Demand Balance in Real Time

It’s important to maintain up-to-date stock levels and have accurate important records. This even includes checking your product locations. Real-time inventory management tracking can help you manage your current stock availability and customer demand so you can avoid potential backlash from customers and any fulfillment concerns. The best way to implement this is to take advantage of an inventory management software that can sync the data availability of products in the store to coordinate with your production team in monitoring work orders for your manufacturing plant. This gives you a clear perspective of where the delays are coming from and what you need to do next.

2Have a Buffer Stock for Reordering Hits

Even if you accurately track orders, you’ll still encounter some issues in fulfilling your customers’ sales orders when demand for your product spikes due to unforeseen demand or there is a large push during the holidays. Having a buffer or a safety stock allows you to continue selling your best products like hotcakes during periods of procurement delays in raw materials and production issues. One way to manage this is to take advantage of automated inventory alerts that will prompt you whenever a certain product line is below its normal stock threshold. Another way is to do forecasting so you’ll know how much stock you’ll need in the future just in case. When projecting your buffer stock, look at sales figures from the same time last year and product seasonality.

3Audit and Conduct Regular Inventory Inspections

Reviews and conducting regular inventory audits are an excellent way to spot potential problems before they become a full-blown crisis. Ideally, this is done on a per-week, per-month basis to cover all your bases. The easiest way to validate your data is to rely on software and generated reports to tally up how much product is in stock. There are several ways to manage this.

You can conduct a physical inventory wherein you literally count on hand everything you have. This is usually done once a year and it can be a bit tedious. Plus, physical inventory checks are disruptive for operations. Another way is to do a spot check. This is a fast and sudden review of a product’s latest count. It’s usually done randomly to inspect any fulfillment issues of certain product lines. Another is to conduct a cycle count. Essentially, you’ll reconcile all your inventory balances in rotation throughout the year. You can do this every day or for a week/month, depending on the schedule or number of products you have. Priority for this one is usually high-value products or high-frequency selling ones.

4. Plan for Emergencies and Contingencies

The secret to effective inventory management is to plan for the worst case scenario and keeping an open mind on any possible changes that may occur. For instance, there are cases that demand will outstrip your supply on hand. These sales spikes naturally occur and you’ll tend to oversell a certain product. Another potential issue could be a storage one. Seasonal demand can trigger the need for bigger spaces to store all your goods. Similarly, another situation can happen wherein a product eats into your space since it doesn’t sell that much. Even miscalculations can occur in your inventory tracking. All these problems add up and form a bigger situation.

Regardless of whether these issues come up or not, the intent is to be prepared for them no matter what. Review your plans and check for potential bottlenecks or issues. Take steps in preparing for these problems. See how they will affect the health of your business.

5Implement a CloudBased Inventory Management System

The biggest problem with inventory management lies in one flaw we cannot easily spot – human error. Let’s face it, we are designed to make mistakes. But the sad reality is that those mistakes have potential consequences, especially on inventory management. While we think these are just simple errors, even the mere mistyping of a figure in a report can spell huge problems down the line. These mistakes can often add up and can be punishing for manufacturers.

Managing inventory by way of an outdated system like Microsoft Excel or Access can be more damaging than helpful. They are easily prone to human errors. The best way to solve this is by implementing a powerful production and inventory management tool that is really made for crafters and small manufacturers like Katana MRP. It helps you avoid manually inputting and managing stock requirements. It eliminates human error and avoids the potential boatload of issues that come with it. You can expect to do proper production planning with real-time updates on the actual manufacturing floor. It provides a comprehensive view of each product in detail. You’ll be in complete control of all sales orders and never miss any purchase fulfillment. You can plan for the future with its built-in supply chain management tracking. Everything is automated – even your suppliers’ contacts are kept up to date. Katana MRP easily integrates well with Shopify and Xero, which makes it part of a business ecosystem that most of us already use. Implementing cloud computing can solve a lot of potential pain in the process.


These 5 proven pro hacks are an effective way to avoid any inventory management issue. Start implementing them today so you can do more with your business and improve your cash flow. Have other hacks that worked for you? Let us know in the comment section below.

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