If you count inventory once a year, your inventory records will be accurate once a year. When you consider that inventory is a yard’s biggest capital investment, “accurate once a year” is a sorry benchmark.

While most business owners already know this, many still have poor inventory management practices for a range of reasons: lack of time, not having the right counting and recording tools, and not having the right processes in place.

Like building a house on a faulty foundation, running a business on faulty inventory records has far-reaching and expensive consequences. Almost every aspect of a business can be affected by poor inventory management practices.

First, poor inventory management hurts profits. When buyers mistrust inventory data, they’re more likely to over-purchase. This means you might easily meet demand, but the extra product means your carrying costs are higher than your competitors. That overhead, coupled with the cash tied up in surplus inventory, all affect the bottom line. Additionally, irregular buying processes make you more vulnerable to market fluctuations. If you’re regularly over- or under-purchasing, price spikes and drops will unduly affect you.

Customer relationships can also be hurt by poor inventory management. Think about someone placing an order now for pick-up at a future date. When the scheduled deadline arrives and the product isn’t in stock, you’ve hurt your customer’s business. Disappointing one client is bad enough, but if you start developing a reputation for back orders, customers may start looking for more dependable suppliers.

Finally, poor inventory management drains company resources. Think about the buyers who are placing another last-minute order because stock has run out; the warehouse crews searching for misplaced product; the sales reps checking the yard before submitting an order. This is time, energy, and focus that could be better spent elsewhere.

The “good” news is, you aren’t alone. Many businesses struggle with maintaining accurate inventory records – your competitors are likely among them. Improving your inventory management isn’t only good for your bottom line, it’s an opportunity to gain a competitive advantage!

Here are three basic strategies to improve your situation and turn a company weakness into a strength.


Before you fix your inventory issues, you need to know what those issues are. Good reporting not only brings problems to light, they help drive action. The following reports are standard options in most inventory management programs.

Inventory turns – how many times you’re cycling through each product in a year – is a good place to begin. Six turns is a good target. If the report shows inventory turns and sales are misaligned, you can adjust your buying strategy.

You’ll also want a "dead stock report" to learn what inventory is sitting around taking up valuable space in your warehouse. Create strategies to get rid of it (like offering deep discounts or rearranging stock so dead items are more likely to get pulled). Then make sure you don’t buy it again.

Finally, a "hit report" shows how many times material shows up on orders. That’s extremely valuable information that’s easy to act on. For instance, you can sort it from the lowest to learn what items are likely to show up next on your dead stock report and again – strategize on how to move it. Doing so frees up both warehouse real estate and cash flow.


Cycle counting, where small batches of inventory are counted throughout the year, is one of the most valuable changes you can make. Compared to the “all hands on deck” annual inventory count, (which we promise your staff hate doing as much as you do), cycle counts allow you to focus on subsets of inventory. They’re also far less disruptive to daily operations. Smaller, more frequent inventory counts not only improve business practices, they also save time.

At minimum, cycle count your A items – the ones earning you 80% or more of your money (most modern inventory management platforms allow you to categorize and flag A-B-C items.) If you’re frequently engaging with these, you’re far less likely to run out of stock or over-purchase.


Finally, consider a mobile inventory management solution. Traditional inventory control methods involve counting items on the floor, writing the counts on sheets, taking those sheets back to the office, then waiting for someone to key the data into the system. A mobile solution eliminates most of those steps. When staff members have a mobile device for tracking counts, whether a scan gun or an app on their phone, they can update records on the floor in real-time. Not only does this make counting less of a burden for them, it drastically reduces opportunities for human error.

There’s a range of mobile inventory tools available from full-blown WMS systems to streamlined apps. If you decide to invest in one of these solutions, make sure it integrates directly with your inventory management software.

Accurate inventory data is a powerful asset in running a successful business. It’s closely connected to both profits and your company resources. It also makes for satisfied customers and happy employees, two things you will always be working to gain and keep.

But by implementing key strategies of cycle counting, actionable reporting, and good software, the groundwork to grow your business will be laid on a nice, solid foundation.

This article originally appeared in the publication Softwood Forest Products Buyer.