According to an analysis, consumables inventory stock occupies around 20% of the total storage space in a company. Some of these items did not leave the shelf for more than 1 ½ years, leading to substantial losses.

These include:

• Holding costs: These are typically 25% to 30% of the inventory’s total unit cost value.
• Labor costs: Deadstock takes up space, just like in-demand stock, and will require maintenance. Therefore, it costs extra money to keep it on shelves.
• Opportunity cost: This refers to the stock opportunities you have to sacrifice by keeping the deadstock in storage. It can translate to 15% or higher.

The costs quickly add up. That’s why you need to get savvy with consumables inventory management. Nest Egg Cloud is a fantastic option for consumable tracking software. Keep reading for all you need to know.
 

Understanding Consumables Inventory

Consumable inventory refers to items that are used, depleted, or worn out over a relatively short period during business operations. These items require frequent replenishment to avoid stockouts and disruptions in the workflow.

Common examples include:

• Office supplies: ink cartridges, pens, printer paper, sticky notes
• Perishable goods: coffee, grains, spices, tea
• Medical disposables: bandages, gloves, syringes

If your business uses consumable goods, you must account for them under ‘supplies on hand’ in your balance sheet. When you file it at the end of the month, quarter, or year, the items used in that period will be considered expenses incurred to generate revenue. As such, they can reduce your tax liability.
 

What Are the Benefits of Consumables Inventory Tracking?

Consumables inventory tracking improves overall supply chain management. Here’s a look at some of the benefits you stand to gain:
 

Better Stock Management

Inventory tracking enhances visibility, providing up-to-the-minute updates on your current stocks and what you need to order to meet surges in demand.

Several approaches make this possible. At Nest Egg, we scan barcodes to enhance management efficiency. This simple, cost-effective method can be used across industries, including hospitality.

When you use the barcode inventory system, you’ll have access to information about the supplier, weight, date of manufacture, dimensions, and expiration date. You can track everything that goes into and out of the warehouse, record the quantity in stock across multiple locations, managing resources effectively and efficiently.
 

Reduce Waste

Consumables require frequent replenishment. But that doesn’t mean you should overstock to keep operations running nonstop. Remember, you’re dealing with perishable goods, which often have a limited shelf life.

Inventory management allows you to rely on cycle counting to take stock of the items in your warehouse. You can then apply one of these strategies to minimize waste:
 

FIFO

Strategic stock rotation with the FIFO (first-in, first-out) method can keep non-durable goods in check. By organizing items based on the expiration date, you can ensure older items are used first, thus preventing stock from losing its viability.
 

LIFO

If you’re stocking non-perishable items that are usable for longer or indefinitely, implement Last In, First Out (LIFO). The newest products are sold first, allowing you to value inventory on hand to lower taxable income. This method is accepted in the USA.
 

JIT

Just-in-time (JIT) inventory is one of the best strategies for minimizing waste. You keep stock levels as low as possible, replenishing them only as needed. Consumables inventory is tied to production schedules, which reduces the costs of inventory holding and the risk of items sitting unused on shelves for too long. The process depends on timely deliveries, so it’s best to go with a local supplier.
 

Prevent Unnecessary Purchases

Inventory management for consumables can be challenging. Many items have short lifespans, after which they are considered unsuitable for use. Unfortunately, many don’t take this into account when buying inventory. They are left with deteriorating supplies that reduce the quality of their products and lead to wasted time and resources.

Consumables inventory management can help you mitigate this risk. With data-driven insights, you can avoid losses due to obsolescence. Once you narrow down the high-demand products, store them on-site on a need-to-have basis. Purchasing things in bulk can have a glaringly obvious impact on your bottom line.
 

Keeping Track of Consumables

Here’s a look at the best practices for business asset tracking:
 

Create a List of Consumable Inventory

What kind of inventory does your business require to keep the daily operations running smoothly? Make a list of those items with the following information:

• Item name and description
• Purchase price
• Location
• Reorder thresholds
• SKU (stock-keeping unit)
• Barcode, if supported
• High-resolution photos

It’s better to set up a perpetual inventory system to get real-time insights into the current quantity your business has on hand. As all data is automatically uploaded at the point of sale, it can protect you from serious slowdowns or overstocking.
 

Analyze Consumption Patterns

Efficient consumables inventory management is all about optimization. By analyzing consumption and fluctuations in demand, businesses can avoid under- or overstocking products. This ensures the correct quantity of products on hand to manage operations.

When implemented successfully, inventory control paves the road to profit maximization with the least amount of investment in inventory.

Unfortunately, people often overlook its importance. Even giants like Nike have been known to take missteps in this arena. In 2016, the multinational sportswear company’s inventory levels rose 11%. Management countered this by offering hefty discounts, which caused its gross margin to decline.
 

Simplify the Reordering Process

When customers are dissatisfied, there’s a 91% chance they won’t do business with you again. An out-of-stock message can send them running to your competitors. This is why knowing exactly when to replenish your stock is important.

Setting a reorder point can help ensure you have enough inventory to meet customer demands but not so much that it ties up your capital or increases your holding costs.

The formula is simple; just multiply the average daily use rate of consumables with their lead time. Also, factor in safety stock to reduce stock-outs caused by inefficient replenishment processes. It will protect you against inaccurate demand forecasts and disruptions in supply chains (price inflation, restrictions, shutdowns, and so on).

Toyota has a similar approach and it is one of the reasons it managed to stay afloat during the pandemic. You can also look at the resiliency of the supply chain amidst the challenges posed by the US baby formula shortage.
 

Choose the Right Suppliers

Maintaining consistency in product quality is a strategic approach to influencing customer satisfaction and purchasing intent. Just look at Apple—this makes your business look more trustworthy, fosters loyalty, and ensures compliance with regulatory standards.

However, it’s not the only driver of business success. Look beyond ensuring a steady supply of high-quality products that meet and exceed customer expectations. Consider these factors:

• How well suppliers communicate
• Availability of technical support
• Reliability in terms of shipping and delivery schedules
• Their problem-resolution process

Also, scrutinize the supplier’s financial statements. It will help you understand where they stand in terms of liquidity, profitability, and solvency. As such, it will give you peace of mind that they’ll deliver the items you want when you need them.
 

Establish Strong Relationships

The supply chain has become more complex in recent decades. Cultivating a mutually beneficial relationship is a big-picture strategy that can make or break your company’s efficiency and profitability. Negotiate deals in good faith and secure favorable contract terms and discounts as a bonus.

Over time, you can escalate it to Vendor Managed Inventory. This innovative approach ensures optimal inventory levels and helps you forge stronger partnerships.
 

Train Your Team

Consumables inventory management is a process with its fair share of twists, turns, and surprises.

Providing your employees with continuous training can help them develop the skills they need to do their jobs effectively. They’ll learn how to create a clean, organized workplace with the 5S methodology and how to tackle issues before they escalate.
 

Implement An Automated Inventory Tracking System

Consumables inventory management can be challenging if you have tens of thousands of SKUs. Creating a standard operating procedure (SOP) could streamline inventory management across different departments in multiple locations. However, as it relies on extensive communication and collaboration, there is room for a lot of error and stress.

Implementing an intelligent stock management solution like Nest Egg can help you easily manage complex product taxonomy through categories and sub-categories. This can put you on the path to growth.

According to a Gartner study, businesses that implement a cloud-based inventory management system can anticipate a 30% reduction in inventory costs.
 

Frequently Asked Questions (FAQs)

What is an example of consumable inventory?

Consumable inventory consists of items used quickly to maintain day-to-day operations. In the medical field, for example, these will be gloves, syringes, and bandages.
 

Is consumable inventory an asset?

In accounting, consumable inventory is classified as a current asset meant to be converted into cash within a year.
 

What is the difference between consumable and non-consumable inventory?

Consumables refer to items that are used up during regular business operations. In contrast, non-consumables are items you store in limited quantities and reuse repeatedly. Examples include furniture, projectors, and machinery.
 

Level up your Inventory Management with Nest Egg

Consumables inventory management can unlock a pathway to a more resilient supply chain and ensure a seamless flow of essential products. But it can be labor-intensive.

Place your trust in Nest Egg to optimize internal operations. It’s a scalable tool with the capacity to recognize millions of products in inventories, large and small. You can track sales through the dashboard, which also hosts intel on products that will soon go out of stock and what they will cost to replace. With contact information of suppliers and OEMs (original equipment manufacturers) available at a glance, it’s easy to place orders and stay on top of planning and logistics.

To learn more about how we can help, contact us today!