Tag Archives: Inventory

4 Ways To Improve Inventory Management for Your Growing Business

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Growth is one of the main goals for most businesses. However, achieving this goal can create new challenges that businesses must deal with to sustain that growth. One vital challenge to overcome is learning how to effectively manage inventory when product lines are expanding due to increased demand. Here’s some advice from ECG Collateral Services:

1. Improve Demand Forecasting

Accurate demand forecasts are essential for effective inventory control. If your forecast is off, you are likely to experience either shortages or surpluses in your inventory. The first part of improving your demand forecast is identifying where each of your products is in the product lifecycle. Products in a growth stage are likely to see an increase in demand, while products in a maturity stage may see fluctuating or decreasing demand. You then need to apply variables such as seasonality, qualitative information sources and trends to achieve an accurate forecast.

2. Prioritize Your Stock

When businesses expand the variety of products they carry, there can be a temptation to reduce the quantity of each product across the board to have enough shelf space for all of the products they sell. However, this can increase the risk of being sold out of your most popular products. A better strategy is to prioritize each product line by its value to your business.

ABC analysis is a straightforward technique many businesses use to prioritize inventory. The goal of ABC analysis is to divide products into categories based on which products have the best sales and highest profit margins so that you can stock more high-value items and fewer lower-value items.

3. Employ Automated Solutions

Inventory optimization software can be used to automate stocking policies, demand forecasting and replenishment tasks. These programs automatically factor in supply and demand variables and adjust inventory levels to make sure you have enough inventory in stock to cover sales forecasts, but don’t have so much stock sitting around that there is a potential for obsolescence or a high opportunity cost.

Inventory planning software can be used to automate your inventory prioritization process. These programs factor in the demand volatility of each product line, the value of each product and the frequency each product gets picked. You can adjust the software to focus on different priorities, such as products with predictable demand and high pick frequencies over less-predictable products that get selected less often.

4. Improve Scheduling and Time Tracking

Data shows that labor costs can account for as much as 70% of total spending. When your business is growing, it is especially important to accurately track and manage your labor resources.

If you have been using manual timecards, consider switching to an easy repeated scheduling and time-tracking solution. These software packages make it easy to set and adjust repeating schedules and notify employees of schedule changes. Additionally, they can integrate with timecard apps that automatically track employees through their smartphone’s GPS. This makes it easier for you to figure out where your employees are at any given time and get automated notifications when they clock in or clock out.

A growing business is a great thing to have. However, failing to update your inventory and employee management systems to keep up with your business can cause that growth to stall. Implementing these four strategies can help you avoid inventory problems and better manage employees while continuing to expand your business.

Inventory – Standard Cost Systems and the Treatment of Variances

The purpose of this post is to discuss some of the possible pitfalls that a lender could encounter when lending on inventory that is managed with a standard cost system.  During this post we will discuss:

  • The difference between management and financial accounting, as it applies to inventory and standard cost systems.
  • The various components of inventory costs (materials, labor and overhead) and how they are impacted by manufacturing efficiencies (or more importantly inefficiencies).
  • The calculation of price and manufacturing variances and how to calculate appropriate borrowing base ineligibles if they exist.
  • The role of field exams and appraisals in mitigating the risks posed by inventory valued at standard costs. Continue reading

Getting More Out Inventory Roll Forwards


I remember hearing a story several years ago from one of my colleagues about an AR fraud that was discovered by an auditor while performing an inventory roll forward.  The person telling this story was and remains well known in the Asset Based Lending arena, so needless to say I was quite intrigued about how a fraud that occurred with AR could be found while performing an inventory review.  I’ll try to retell the story here; hopefully, my memory will do it justice.  In addition, I’ll try to relate the procedures performed by the auditor to examination procedures performed today. Continue reading