How to Create an Inventory System

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An inventory system is vital to controlling purchasing costs and meeting customer service goals. While an electronic inventory management program is a helpful administration tool, the key to a good system lies in the strength of the procedures you create. Some of the most critical elements in a well-developed system are item descriptions, a numbering system, standard units of measure and accurate item labeling.

Item Descriptions and Numbers

Create a stock list that includes a description and a unique four- to -eight-character number for each item. A best practice for creating a description is to start with a noun and then use adjectives in descending order of importance to describe the item. Descriptions such as “cup, coffee, large, brown,” “cup, coffee, medium, white” and “cup, coffee, small, white” are some examples. Item numbers should simply identify, not describe an item. However, you can incorporate a few letters from the description at the beginning of your item number to make looking up items easier. For example, you might use the number “CUC101” to identify a coffee cup and the number “CUS101” to identify a soda cup.

Decide on Standard Units of Measure

Create a list of approved units of measure to clarify pick lists and inventory reports. For most businesses, default measures are the units in which you usually purchase an item. Common units are abbreviations for terms such as each, piece, foot, pounds or gallons. Best-practice guidelines recommend that you pick one abbreviation and apply both its spelling and appearance consistently.

Establish Location Names

Assigned locations can make items easier to find in any storage room or warehouse, no matter how big it is. If you store items in more than location, give each location a name or code number, such as “M” for the main warehouse and “S” for surplus storage. Then divide the room into sections, and give each a unique name. For example, sections can correspond to an aisle or bin number. Complete this task by identifying shelf locations for specific inventory items. The Clearly Inventory Company recommends using a numbering system in which the lowest number corresponds to the highest shelf and descends toward the floor. For example, a label such as “M-2-4” tells you an item is on the fourth shelf in aisle two of the main warehouse.

Label and Store Inventory

Create a label for each inventory item that corresponds to the stock list you created. Conduct a physical inventory count as you label, store and enter item, units of measure and location information into an inventory database. Print picking and receiving documents from the database and use these to update the database and create inventory reports.