An SME's Guide to Inventory Management

You receive a payment notification for your best-selling product. It’s a great moment, until a sudden wave of panic washes over you: Do we still have that in stock? You rush to check your storeroom, frantically searching through shelves while the customer waits.

This scenario is an all-too-common reality for growing businesses in Nigeria. On the flip side is the equally painful problem of storerooms overflowing with products that aren’t moving, tying up cash that your business desperately needs for growth.

Both of these problems stem from the same root cause: a lack of strategic inventory management. In reality, your inventory is one of your largest and most important financial assets. Managing it effectively is a critical business function that directly impacts your cash flow, customer satisfaction, and profitability. 

This guide will provide a clear framework that helps you turn your inventory into a strategic asset.

What is Inventory Management?

At its core, inventory management is the systematic approach to sourcing, storing, and selling your stock, both raw materials and finished goods. In simple terms, it's about knowing three things at all times:

1. What you have.
2. Where it is.
3. How much you need.

A business that masters this can ensure it rarely holds too much stock, and seldom, if ever, runs out of its most popular items.

Why Your Spreadsheet Is Costing You Money

For most startups, an Excel spreadsheet is the first inventory tool. It’s a great start, but as your business grows, its limitations quickly become expensive liabilities.

Relying on manual data entry and guesswork leads to three significant costs:

1. Loss of Customer Trust

When a customer wants to buy a product that is out of stock, you don't just lose that one sale. You lose potential future sales from that customer, and you risk them leaving a negative review or turning to a competitor. Stockouts signal unreliability and directly damage your brand's reputation.

2. Capital Freeze

Every product sitting on your shelf is cash that isn't working for your business. Overstocking ties up capital that could be used for marketing, new hires, or product development. It also increases storage costs and exposes your business to the risk of inventory becoming obsolete, damaged, or expired.

3. Inefficiency Drain

Manually counting stock, reconciling numbers after a sales promotion, and searching for misplaced items consumes countless hours that could be spent on growing your business.

As you add more products and sales channels, the likelihood of human error increases, leading to a state of constant, time-consuming firefighting.

Fundamental Stock Control Techniques for Every SME

Before you can leverage technology, you need to understand the fundamental principles of stock control. Implementing these techniques will immediately bring a level of order to your operations.

1. ABC Analysis

Not all inventory is created equal. ABC analysis helps you prioritize your efforts by categorizing products:

• A-Items: Your best-sellers. These make up a small portion of your total inventory items (~20%) but contribute the most to your revenue (~80%). They require close and frequent monitoring.
• B-Items: Your mid-range products. They are important but sell less frequently than A-items.
• C-Items: The bulk of your inventory items that contribute the least to your revenue. These require less stringent tracking.

2. FIFO (First-In, First-Out)

This is a critical principle, especially for businesses selling perishable goods or products with a limited shelf life (like cosmetics or electronics). 

It means the first products you received into your inventory are the first ones you sell. This prevents spoilage and obsolescence.

3. Set Par Levels (Reorder Points)

A par level is the minimum amount of stock you want to have on hand for an item at all times. When your stock count hits this level, it’s a trigger to reorder from your supplier.

Setting these levels, even based on simple sales estimates, is the most effective way to avoid stockouts.

4. Regular Stock Audits

Don't wait for a massive, dreaded annual stock-take. Implement cycle counting, which is the process of counting a small subset of your inventory regularly (e.g., counting all your A-items every week). This makes inventory counting a manageable routine, improves accuracy, and helps you identify issues early.

Leveraging Technology for Growth

These manual techniques are powerful, but to truly scale and cut inventory costs, you need to move beyond the spreadsheet. You know it's time to upgrade to an inventory software for SMEs when:

• You start selling on multiple channels (e.g., your website, Jumia, and in-person).
• You frequently discover discrepancies between your spreadsheet and your physical stock.
• You need real-time data to make fast purchasing decisions.

A dedicated inventory platform provides:

• Centralized, Real-Time Tracking: See accurate stock levels across all your sales channels at once.
• Automated Reorder Alerts: The system automatically notifies you when an item hits its par level.
• Powerful Sales Analytics: Get data on your best-selling products and sales trends to make smarter forecasting and purchasing decisions.
• Seamless Integration: A modern inventory system connects directly with your sales and logistics platforms. This integration is a cornerstone of efficient logistics for your startup, ensuring that when an item sells, it’s not just deducted from your stock count but is also instantly queued for dispatch and fleet management.

Conclusion

Effective inventory management for your small business transforms your stock from a source of stress and a potential liability into a well-managed, strategic asset that fuels your growth. 

Ready to connect your inventory to your delivery operations?

An efficient business needs end-to-end visibility. See how Dellioo’s platform can help you manage your operations from the moment an order is placed to the final-mile delivery. Schedule a demo with a Dellioo expert today.