As a handmade business, once you accumulate a certain amount of inventory it starts to become a priority to ensure that you have it organised in some sort of fashion that allows you to access it quickly and efficiently. Otherwise, time you could be using to produce your products and grow your business is rapidly used up by rummaging through mislabeled boxes, scratching your head and mumbling "I'm sure I put it here somewhere..."

The best first step to a well organised inventory is to develop a location naming system for all your stock: this includes both your materials and finished products. While this sounds complicated, it's really just a case of deciding on a way to group together and label your inventory using a consistent naming system. There has been much thought put into the most effective naming systems for inventory and many of the principles can be applied to small craft businesses as well.

Uniqueness

Above all else, each location name should be unique - you need to be able to clearly picture the exact place in your mind when you think of the name. You'll also need to be consistent with applying locations to all of your inventory for this to work well - it's no use having a great location name system for your flour if you can still never find your baking powder.

Static Locations Rule

Don't name your locations based on something that can move around - if you have your buttons located in a blue box that sometimes lives in one location but at other times can be somewhere else, giving the box itself a name is not going to help matters much. If the box should be located on the top shelf of your garage, then name this area instead and ensure that the box is always returned to this space.

Three Part Coding

Most bit warehouse systems involve a three or four part naming system. This enables you to read the code from left to right and narrow down exactly where your material is.

The groupings differ depending on the storage situation, so for big operations they might use a code that contains the warehouse number, followed by aisle and then finally the exact location. If you've ever been to Ikea and picked up items off the warehouse floor, then you'll have already used this type of system before.

Even if you don't have multiple warehouses and aisles, you can still adapt this system to work for your situation.

For example, you might like to use a Zones - Section - Position type approach. This involves accessing your storage areas to create basic "zones" - these are the high level groupings you'll want to use so that you know roughly whereabouts your material is. These zones can be different rooms, or even different areas inside the same room. You can either use a number for each zone (i.e. your garage area is 1, your workshop storage is 2 etc.), a letter, a color, or perhaps you might like to use a code you create yourself ("G" for garage, "W" for workshop).

Within each zone, you can then further divide into sections - how many sections completely depends on how much stock you have and the different types you need to sort through. Bookshelves, storage units and static boxes are good candidates for sections. Again, you can either use numerical, alphabetical or a code: whatever works for you.

You'll now be defining the location inside each section. This should be assigned to each material and should be the most granular level of finding your material. You might like to use alphabetical (A-Z) or numeric naming (1-99) to denote each spot in your section.

Once you have figured out the system to use, you'll then want to give each of your materials a unique code based on the three sections. This is usually written as ZONE-SECTION-POSITION. So, if you store your Red Buttons in a box on the 4th shelf in your workspace, you might give it the code W-S4-12.

You'll want to ensure that you are also using a good inventory system that allows you to record this information, so you have a full list of locations for each of your materials.

Labelling your Locations

Next comes the important task of clearly marking your locations. This is where having an abbreviated coding system really comes in handy.

For your zones, you might like to create signage that is attached permanently to a wall or door. About A4 size is generally sufficient for readability. Different color codings can also work particularily well as you can usually see these at a distance (although keep in mind color blindness issues if you have staff).

For your sections and positions, try to apply the label in a constant place. Most warehouses usually display a label below the location with an arrow pointing upward to ensure no mistakes are made.

Want to learn more about handmade inventory management?

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Topics covered include:

  • Reasons why inventory tracking is essential for handmade business
  • Inventory Assets vs. expenditures
  • Supplies and materials
  • Direct and Indirect Expenses
  • Methods of Valuing your Inventory
  • Perpetual vs. Periodic Tracking
  • Stocktaking Strategies

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