Your business inventory refers to the products you have in-stock awaiting purchase. Storing your inventory will depend on your available space, spoilage concerns, costs, and efficiency. In fact, when it comes to inventory storage, many businesses use different methods, such as first-in, first-out (FIFO), or last-in, first-out (LIFO).
Moving your inventory affects the value of your inventory. Using the proper inventory storage solution will allow you to help your company grow. However, incorrect inventory storage and inventory management systems may cause you to risk your products becoming lost, damaged, unavailable, or stolen.
To choose the best inventory storage solution for your business, you should consider your options. This blog post goes over the inventory storage definition and three options your business may have.
Inventory Storage Meaning
The meaning of inventory storage refers to the systems and solutions businesses have in place to manage, organize, track, and store their items. Inventory storage solutions often take into account the available space businesses have, budgets, potential spoilage issues, and stock unloading options.
Two common inventory unloading methods include:
- Last-in, first-out. This system refers to the process of selling the inventory items that were brought in last, first.
- First-in, first out. Using the first-in, first-out method refers to the process of selling the inventory you bring in first.
In order to sell inventory using one of the methods above, you need to store it properly so that it’s easily accessible. Businesses will often use drive-in racks, push-back racks, or flow-through racks. This way, employees can access items from various points.
Key Takeaway: Many businesses utilize Inventory storage solutions in order to easily track, organize, manage, and store their inventory. It’s also common for them to have access to different inventory reports.
3 Options for Inventory Storage
When opening a business, such as opening a restaurant, opening a food truck, opening a coffee shop, or opening a grocery store, you will want to have the ideal inventory storage method.
Three common options for inventory storage include:
1. Warehouse Storage
The most common inventory storage method is warehouse storage. In fact, common warehousing solutions include businesses receiving shipments and sending products to customers or store locations. This all happens from a central warehouse location.
This method is commonly used to grow eCommerce businesses. In most cases, businesses will pay for a storage location, or warehouse, where they send their inventory before it is picked for shipping.
The benefit of using warehouse storage is that inventory is organized and managed by warehouse staff. It’s also cost-effective to move large amounts of inventory and these management systems can minimize the risk of inventory errors.
2. Outsourcing Inventory or 3PL Storage
It’s possible for businesses to outsource fulfillment operations to 3PL companies. This means that they can store their inventory, and pick, pack, and ship orders direct-to-consumer (DTC).
3PL companies are simple to work with because they do the work for the businesses. This means that your business won’t be responsible for running full-scale operations.
These companies are experts when it comes to inventory and fulfillment. They also manage parts of the shipping and retail fulfillment process to maximize efficiency in order to get orders out as quickly as possible.
It’s common for 3PL companies to have multiple fulfillment centers in order to optimize deliveries and reduce shipping and handling costs. These businesses also provide fast shipping solutions and access to inventory tracking and management tools.
Small businesses oftentimes choose self-storage solutions for their inventory. In fact, they use existing spaces for inventory storage.
This option is ideal for businesses that are just starting out or those that are no longer interested in the lack of control dropshipping services offer. It’s common for self-storage options to be a short-term solution for small businesses.
This is because it’s a cost-effective method as it utilizes small storage facilities, including garages, closets, or spare rooms, to store inventory. The inventory is easy to access as it is always on hand.
Inventory Storage Tips
Keeping things organized is important, especially when dealing with your business’s inventory. That’s why businesses prefer to follow some of the best practices for inventory storage.
Here are some tips for inventory storage:
Utilize Inventory Management and Tracking
If your business decides to utilize warehousing or self-storage options, you may benefit from inventory management software, such as restaurant inventory software. This software manages and tracks inventory while also providing you with the option to perform inventory and warehouse audits.
Inventory management software makes it possible to automate stock updates in real-time, so you know which items are low in stock. You can also set a reorder point for each item to automatically reorder inventory when it reaches a certain amount. It's also important to track metrics, such as days inventory outstanding, weighted average cost, and inventory turnover.
Perform Route Inventory Checks
Checking your inventory on a regular basis can ensure that you have just what you need on hand. This should be done on a daily, weekly, and monthly basis depending on your business and the type of inventory you have.
Routine inventory checks allow you to stay up to date with accounting, and it helps reduce the risk of theft or damage. This is because you can track where your products are and how much of each product you have on hand at a given time. It can also help reduce the risk of phantom inventory.
Set Reorder Points for SKUs
You will have to reorder inventory at some point. Using the right technology for this process will allow you to set automatic notifications that will alert you when it’s time to replenish your inventory.
It’s possible to do this for each individual SKU number or UPC code in your inventory. Inventory management software and 3PL software make it simple for you to do this. The software may also provide historical information that can help with demand planning and inventory forecasting.
Keep in mind that each product may have a different reorder point. Items that tend to sell out faster compared to the rest of your inventory may require a different reorder point than items that tend to sit longer on the shelf. Using an inventory scanner and a centralized inventory method will help keep the accuracy of your inventory.
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Upgrade Your Inventory Storage System
You may be using an inventory storage system that is outdated. If you can’t keep up with consumer demands, you may want to consider upgrading your inventory storage system. This will allow you to easily access stock information and improve your overall inventory management processes.
Frequently Asked Questions About the Inventory Storage Definition
Deciding on the ideal type of inventory option solution is crucial for any business. The options often include warehouse storage, self-storage, and third-party storage. To better understand the importance of inventory storage, read the following commonly asked questions.
What Are the 5 Types of Inventory?
The types of inventory can vary based on the business; however, the five common types of inventory include:
- Raw materials inventory
- Maintenance, repair, and operating inventory (MRO inventory)
- Decoupling inventory
- Work in process inventory
- Finished goods inventory
What Is Inventory Process?
Inventory process refers to the way businesses track their inventory including how they receive, store, manage, withdraw, or consume it through work-in-process inventory. It is also considered to be a lifecycle of goods and raw materials.
Why Is Inventory Storage Important?
Inventory storage is important because it can help ensure businesses don’t have too much or too little stock on hand. This is what reduces the risk of stock-outs, overselling, and inaccurate records. This is especially necessary when it comes to holiday inventory management.