How to Organize Inventory for a Small Business on a Budget

//How to Organize Inventory for a Small Business on a Budget

How to Organize Inventory for a Small Business on a Budget

If you find yourself running a small business out of an apartment, townhouse, or a single bedroom – inventory is eventually going to become a problem. For small business owners, storing your inventory might not be a problem – but finding it once orders start pouring in can be a challenge. I’ve had inventory lost, and believe me, it’s not a fun experience for you or your buyer, and can jeopardize your entire business if it continues to happen. Whether you are selling on eBay or Shopify, I’m going to share a simple inventory system that you can implement to take your small business to the next level on a very small budget.

Whether you are selling t-shirts, reselling clothing, or buying an selling other small to resell, this inventory system can be implemented just about anywhere, and is used by several successful eBay sellers that I know. It may need some tweaking to fit your exact business model, but has worked for me over the past couple of years.

I’m going to start by listing some supplies that you will need to make this happen. I wouldn’t advise purchasing everything right at once, but slowly start to add in more storage racks, bins, etc. as you grow.

Supplies: What You Might Need

There are several items that are helpful to have when getting started that I use just about everyday. I find that most of the time, you can pick these items up a bit cheaper online, than you can at Staples, or even Walmart. These are just a few items I recommend, and where you can pick them up at:

Masking Tape

When selling clothing or other small items, I use masking tape as a low-cost alternative to buying labels for inventory. Let’s say you have anywhere from 200 to 300 items per day, having to constantly re-stock stickers, labels, or whatever it is that you use can become unnecessary. I have used masking tape for everything – from labeling bins, shelves, and inventory – more on that later.

I have gone through about 3 to 4 rolls this year selling on eBay part time, so you may want to pick up a 6-pack on Amazon for about 12 bucks if you are a medium to high volume seller.

Clear Plastic Poly Bags

Out of all the supplies I buy on a regular basis, poly bags have turned out to be more important than I thought. I have been using them for about a year now, and usually insert anything from shoes, hats, and clothing into these BEFORE storing them in plastic containers. If you are keeping inventory in a storage unit, you don’t really have to worry about dust or debris getting on your items. As a buyer, I always appreciate when my item is presented to me in clear plastic – it just seems more professional. If you buy them in bulk, you can get them for a few cents a piece.

Storage Bins

For smaller sellers, I’m a big fan of bins that fit nicely on shelves – not too short, tall, or bulky. I’ve found that when trying to find inventory, it’s easier for me to move bins that are filled to capacity when they only hold about 56 quarts. I usually buy these bins made by Sterilite, that cost about 6-8 bucks on Amazon.

You can fit alot of inventory into the large 18 gallon  storage tubs, so it might be worth picking up a couple of these. However, I’ve found these work best when transferring alot inventory into smaller containers my storage unit, instead of storing 50 items in each one. I used to do this, but they can get quite heavy – especially when lifting these on and off the 4th or 5th shelf.

Storage Racks

Everyone’s operation is a little bit different, but I definitely recommend metal racks as opposed to plastic. This is probably the biggest expense when growing an eBay business, but it’s definitely worth it. You can find several on Amazon for around 40 dollars that actually have wheels. This one made by Seveille Classics is their #1 best seller.

Keep in mind, that if you plan to grow into a warehouse you may want to invest in heavy duty commercial storage racks, for 20 to 30 dollars more. Whether you are selling clothing, small appliances, or just about anything else, you can fit alot more inventory on these, and they can grow with you.

Step 1: Select a Dedicated Room or Storage Unit for your Small Business

If you are currently running your small business out of your apartment (like I was), the first part of organizing your inventory is to set aside a dedicated room or space. This can be a small storage unit, if your business is making $60-100 in profit every month to cover the cost. You can start with a small 4′ x 10′ unit, and evolve to a climate controlled 10′ x 10′ unit, which I recommend.

If you are not full time, I would find a location near your full-time or part-time job, so it’s easy to drop by in the mornings, or after work when you need to pick up inventory that sold.

Step 2: Create your Inventory System

The backbone behind any inventory-driven business is having a system to manage all of it. I use a spreadsheet when adding items to my eBay store, Shopify store, etc. I keep it simple and assign a letter and a number to each item. As an example, the first item I ever listed was labeled A01. On the spreadsheet, I have columns like SKU Number, Year, Month, Day, Area, Fixture, Shelf, Bin, Item#, Type, and Item Name.

Below is a screenshot of one of the spreadsheets I use for eBay:

ebay inventory system

So for example, in cell A1, a SKU (or stock keeping unit number) is generated by entering the following formula: =B2&C2&D2&E2&F2&G2&H2&I2 which combines all of this important info. This also makes it easy to keep track of how long it took for an item to sell. So, for example, on the 2nd row, I listed an item on January 2nd, 2018. It is in area #1, fixture #1, shelf #1, bin #1, and the Item number is A01. I’ll explain more in the next section.

Breaking Down the SKU – What each part means

Now that you have a basic inventory system, in place in excel, I’ll explain what the parts to this system actually mean, and how to assign labels to individual items. Year, Month, and Day are pretty self explanatory, and help keep track of how long it took for an item to sell. So for example, if I sell this Adidas t shirt on July 15th, 2018, I can simply run a report of all of my sold items, and determine (based on the SKU number) that this item was listed on January 2nd 2018. I always make sure I enter January as 01, instead of 1, for reporting purposes. I treat days the same way – 01, 02, 03, and so on.

As long as you know the date the item sold, and the SKU number of that item listed, you can easily calculate how long it took an item to sell using an excel formula. In this case, it would be 194 days if the items sells July 15th. You will want to do some data manipulation to break apart the parts of the SKU number you need, and format it so excel recognized it as a date. You will basically need to transform  180102 to look like 1/2/2018 in excel. There are lots of tutorials on how to manipulate data within spreadsheets that I would get familiar with. it’s not necessary to have this kind of insight if you are a beginner, but definitely helpful as you begin to grow and want to know what items have the best sell-through.

Going back to the spreadsheet, A1 is short for area 1. Basically the area you are keeping this group of inventory. Area 1 for me is my storage unit. If I were to outgrow my current storage unit, I can just label my second storage unit as A2. If you have a warehouse, it follows the same principle. This system will grow with you, and is actually similar to how Amazon assigns inventory numbers from what I’ve read.

F1=Fixture 1 in this example. For me a fixture is the same as a 5-shelf rack. So, if you can fit 7 racks in your storage unit, you would label each rack as F1,F2,F3,F4 and so on. I arrange mine clockwise around the perimeter since I use a storage unit, so it gives me room to walk around. If you have a warehouse, arranging them in rows may be a good idea. As long as they are in order and easy to get to.

The part of the SKU is S1 or shelf 1. If you have a 5-shelf rack, the bottom level would be S1, the second would be S2, and so forth. The next part of the SKU is B1 or bin 1. I can only fit 2 bins on each shelf, so every SKU has either B1 or B2 included. B1 is always the bin on the left, and B2 is always the bin on the right. If you have larger racks, you can probably fit 4 or 5 bins on each shelf, so you would have B1, B2, B3, B4, and so on.

The last part is the actual item number. I have a system that runs from A01 to A100, and then B1-B100. Since I sell clothing, I know I can fit about 20 items per bin, so my first bin is labeled A01-A20, the second being A21-A40.

Step 3: Label your Inventory

Here’s where the masking tape and poly bags come into play. After listing an item on Shopify, eBay, or wherever you sell, start filling out your spreadsheet, and assign an item number.  Once the item number is assigned, place the item in a clear poly bag, and write the number of a piece of masking tape to stick on the bag. From there, place it in a bin labeled “A01-A20” for example, and start filling up your first rack. I use the tape to seal the bag itself.

Conclusion

Overall, this setup can cost you as little as around $150 to get started. Most storage units start out at around $50-$100 per month for a decent sized unit. However, if you only have a few SKUs, you can start by purchasing your first storage rack to keep in your house or apartment, or just start with purchasing bins. Some sellers actually keep all of their inventory in a garage or spare bedroom, which is great if you’ve got the storage space.

Keep in mind, you may wish to separate your inventory from your personal life – believe me, it can test your sanity if you are still storing your inventory in a bedroom, along with your personal stuff. The bottom line is that you will want to set up a system that allows you to quickly find your inventory.

Time is money, and you don’t want to be stuck trying to sort through 20 pairs of Levi jeans that all look the same. Trying to find one sized 34W x 38L is a pain, when you’ve got 50 random items scattered on the floor. Once everything is organized, you’ll save yourself a world of heachache. When listing similar items, I recommend not listing them one after the other if you can help it. The benefit to doing this is that the likelihood of you mistaking one item for another is greatly reduced. For example, if you have a bin with only a toaster, a pair of jeans, and a coloring book, you’re not likely to mistake one item for the next! This is actually used by Amazon and many other retailers to prevent errors.

I hope these tips have been helpful for anyone looking to organize their inventory on a budget. Let me know in the comments how you like to store your inventory, and any other cost saving tips that help helped you along the way.

By | 2018-01-07T06:33:52+00:00 January 7th, 2018|Business Efficiency|0 Comments

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