Walk into the godown of a struggling trader and you will usually find the problem stacked on the shelves: too much of what does not sell, too little of what does, and nobody sure what is actually there. Inventory is usually a small business's largest investment after premises — yet it is managed by memory. This guide covers the handful of disciplines that put you back in control.
Know what you have: the baseline count
Start with a full physical count — every SKU, every location, including damaged and display stock. Value it at cost. Most owners are shocked twice: by the total (usually higher than they guessed) and by the dead stock share (often 15–30% of value). This baseline becomes your system's opening balance; without it, every report that follows is fiction.
ABC analysis: manage the vital few
- A items — the ~20% of SKUs producing ~80% of sales: count weekly, never stock out, negotiate hard on price
- B items — the middle ~30%: standard reorder rules, monthly counts
- C items — the long tail: minimum stock or order-on-demand, quarterly counts, prune ruthlessly
The insight is that equal attention to all items is mismanagement. An hour spent on A-item availability earns more than a day spent organising C items.
Reorder points: buy on math, not mood
For each A and B item set a reorder point: average daily sales × supplier lead time in days + a safety stock for variability. If you sell 10 packets a day and your supplier takes 5 days, reorder at 50 plus safety stock of, say, 20 — at 70 packets, order. Order quantity balances rate benefits against holding cost; resist "scheme" purchases that park three months of cash on a shelf for a 2% discount.
Rotation and expiry: FIFO as a habit
First-in-first-out is a physical arrangement, not a software setting: new stock goes behind, sales pick from the front. For anything with expiry — food, cosmetics, pharma — add a monthly near-expiry report and a liquidation rule (discount, bundle, return to supplier where agreed) well before dates lapse. Expired stock is a 100% loss that was visible months in advance.
The difference between book stock and physical stock — theft, damage, unbilled sales — averages 1–3% of sales in unmanaged stores. Count A items weekly, investigate variances the same day, and shrinkage falls simply because everyone knows counting happens.
Simple systems that work
- A POS or billing system with inventory (many affordable Indian options exist) beats registers and memory the day you cross ~100 SKUs
- Barcode from day one where products allow — accuracy at billing is where book stock goes wrong
- Insist on entering purchases the day they arrive; a system fed weekly is a system nobody trusts
- Reports that matter monthly: stock ageing, fast/slow movers, shrinkage, and stock-to-sales ratio by category
The numbers to watch
Inventory turns (annual cost of goods sold ÷ average inventory) tells you how hard your stock is working — grocery runs high, electronics moderate, furniture low; falling turns mean cash is silting up. Days of inventory (365 ÷ turns) should roughly match your category norm and your supplier lead times. Review both quarterly alongside dead-stock percentage; those three numbers summarise the whole discipline.
How Aidwish helps
Aidwish sets up inventory systems as part of its SOP and technology stage — ABC classification, reorder rules, count calendars and software selection — so stock stops being a black hole and becomes a managed asset.