Step 2

Implement fool-proof systems for inventory receipt and storage. Section off designated areas for each inventory item; clearly label each section and train new employees on the storage area's layout. Create user-friendly checklists and verification procedures for employees receiving or making shipments of inventory.

Step 3

Create a plan to take advantage of central warehousing and cooperative purchasing techniques. Create a formal system to replenish inventory at one location with excess inventory from another location, when possible, and to combine purchases for several locations into a single purchase order. This can help you to make fewer and larger purchases, allowing you to take advantage of quantity discounts and minimize distribution costs across the supply chain.

Step 4

Estimate demand for each stock item annually. Create demand schedules covering each quarter or month in the coming year. Take seasonal demand fluctuations into account, and plan to stock up on seasonal inventory items early. Established companies can use previous years; sales figures as a starting point when estimating demand; new businesses may have to rely on competitors; past revenue figures and management’s expectations for first year market share. Use these estimates to calculate the ideal re-order points and maximum stock levels for each stock item.

Step 5

Create a database of all stock items. For each stock item, include information on the item’s cost, suppliers, current stock level, lead time and inventory classification.

Step 6

Create a notification system to alert employees when an inventory item's re-order point or maximum stock level has been reached. Determine the point at which the system triggers a notification by taking the item’s lead time and recent demand into consideration.

Step 7

Establish policies that ensure the timely processing of all paperwork, including purchase orders, receipts and inventory counts as quickly as possible to ensure your records are continually accurate. Establish a manual or computer-aided process to update your stock database at least daily, covering all inventory receipts, sales and transfers.