Operations Management

Visual Inventory

Written by Andrew Goldman for Gaebler Ventures

Organizing your inventory in a fashion where you can see what you have can greatly improve your inventory management. Learn techniques for creating a visual inventory system.

Many small businesses find periodic inventory reviews cumbersome and time-consuming.

As a result, they conduct inventory recording less frequently than they should and the process can be grueling. By creating visual inventory systems, you can make the inventory tracking process easier and more up-to-date. Using some simple techniques, you can change the way your company views its inventorying process.

The first step in creating a visual inventory system is to have the appropriate equipment and environment in place. This does not require serious capital expenditure, more likely just some clean-up, reorganization and additional racking. The basic idea behind a visual inventory system is that you should be able to look at the product on your shelf and have a good sense of what is there.

Sound simple? In a way it is, it just requires some initial set-up and on-going maintenance.

If your inventory is cluttered and all over your facility, it's time to get everything organized and squared away. This may mean purchasing additional racking to hold your inventory. Make sure inventory is in designated spots and organized neatly. There shouldn't be piles of boxes and clutter blocking your view of inventory. Different product should not be stored on top of one another and the inventory should be easy to view and easily accessible.

Once you've set-up your inventory initially in a visually friendly way, making sure it stays this way is the key. This means training employees and explaining the importance of the new inventory methods. Once your system is set-up and maintained, you can conduct periodic inventory reviews frequently simply by walking through your storage area.

In addition to these periodic visual reviews, you should still be conducting pen and pencil reviews a few times a year. You'll find this reviewing process will be far easier once you have a nice organized visual inventory system.

You can also add a reorder element to the visual review system. If you have boxes of product stored on shelves, you may create a color-coded "reorder" line on the shelf. Once the inventory drops below the visual reorder line, a new order is placed. This still requires someone to walk through storage and note the level of inventory, but it can be helpful for employees to alert appropriate parties when they see the inventory drop below the line.

This "reorder line" can be applied to other areas of your company as well. If your company goes through a lot of computer paper, you may store the paper in a similar fashion with a reorder line drawn on the storage rack.

The amount of inventory below the line should be enough paper to cover the company during the lead time of reordering. Paper can usually be delivered within a day or two, so this means only a few reams of paper will exist below the reorder line. If you were dealing with bottle caps that had an 8 week lead time, you would have a larger quantity below the reorder line.

By using visual inventory queues you can help keep your company more organized and more up to speed. In general, getting your inventory organized and uncluttered will greatly aid your company's operation.

Andrew Goldman is an Isenberg School of Management MBA student at the University of Massachusetts Amherst. He has extensive experience working with small businesses on a consulting basis.