inventory management

Getting Started With Your Inventory

How you, as a handmade crafter, can get started with inventory management.

First-time crafters face a major hurdle when they start ramping up production: managing all of the stuff they’ve got. We’re talking about fabric, glue, packaging supplies, tools and all of the other sundry items you need to fulfill orders.

And where are you keeping all of it?

If you’re like most handmade sellers, you don’t have the luxury of a warehouse or a production facility. You’re using your bedroom, your living room, your garage, or your apartment. That means a lot of clutter in your personal space.

A disorganized mess also makes it harder to run your actual business. Think about it—how much time do you lose hunting through piles of thread to find one particular color?

Inventory management is both a skill and a system that you need to pick up as soon as possible if your business is to grow. That’s why we’ve put together this blog as a way of helping you get started.

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Why does inventory management matter?

Inventory management can mean the difference between you having a part-time hobby and a sustainable small business.

Without exaggeration, proper inventory management can:

  • Increase your production speed
  • Reduce your overhead costs
  • Increase your profit
  • Improve the quality of your product
  • Eliminate clutter in your personal space
  • Simplify your taxes

Excited yet? We are! Let’s get started.

Establishing inventory basics

Building your first inventory management process may sound like a big project (and it is), but it’s still doable—even if you’re running the business by yourself. What you need to do is break the project down into phases, each with their own micro-goals.

And to help you get started, we’ve laid these micro-goals out for you:

1. List what you have on hand

You can’t manage your inventory if you don’t know what you’ve already got on hand. So the first thing you need to do is make a count of all of the materials, supplies, and finished products currently in stock.

After you’ve built your baseline inventory count, you can then determine if you are understocked or overstocked on specific items, and whether or not you need to resupply. This will also be a good opportunity to review the types of products that you buy, and judge whether you’re satisfied at the current levels of quality and cost.

2. Organize your storage process

Some handmade sellers brag about having an “organized mess” of a workspace; but if you’re going to run an efficient business, you need to do a lot better than that.

Store materials and supplies into separate and clearly-labeled bins or shelves. Arrange your storage in such a way that the most commonly used materials are the most accessible, while keeping the rest in a convenient place.

This way, you’ll be able to both find things more easily while you’re working, and speed up inventory tracking when you do your counts.

3. Track and estimate inventory costs

One of the major reasons to do inventory management (aside from making it easy for you to craft products) is to understand your costs.

When you understand your costs, you’ll be able to assess how much you’re spending on materials and supplies, and see how much of it is eating into your profit margin. Armed with that knowledge, you’ll be able to experiment with your pricing to see if you can find the right “sweet spot” of pricing high enough to earn a decent profit, and low enough that customers will still buy your products.

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You’ll also be able to assess and correct past spending habits—you might chronically under-buy supplies, for example, and run out at critical times. Or maybe the opposite, where you over-buy slow-moving materials and wind up dumping the excess.

You can then build on that baseline knowledge of your costs and spending to predict future costs, which will be important for setting your budget and anticipating seasonal changes.

4. Consider buying in bulk

Now that you’ve assessed your buying habits and their impact on how much you spend on materials, you may want to consider buying some items (not all) in bulk.

When buying in bulk, prioritize items that:

  • Are used frequently and in large quantities
  • Store well
  • Offer a significant price discount when bought in bulk

Buying in bulk may mean developing relationships with manufacturers for the bulk items. You may have to shop around a bit before finding a manufacturer you’re comfortable working with.

5. Re-track and re-tune progress

Remember that inventory management is a process of ongoing improvements. What we just did now was to get you started on a basic, baseline level of organization. There will still be plenty of opportunities for you to revisit your inventory management and make refinements as you develop a Standard Operating Procedure for stocking goods.

This can happen for a number of reasons. For example, you might not be happy with your first attempt at categorizing materials and rearrange things on the shelf. Or maybe you started making a new product that requires new materials or uses up materials faster.

Or perhaps you started learning about the FIFO and LIFO inventory management process and would like to optimize your stocktaking and storage processes to be more compliant.

Whatever the case may be, stay flexible and don’t be afraid to make changes if it will lead to a better system—even if the definition of “better” shifts over time.

Are you looking for more insight on how your inventory is affecting your potential profit? Check out Craftybase’s Pricing Guidance tool and become more confident in your product pricing.

Nicole Pascoe Nicole Pascoe - Profile

Written by Nicole Pascoe

Nicole is the co-founder of Craftybase, inventory and manufacturing software designed for small manufacturers. She has been working with, and writing articles for, small manufacturing businesses for the last 12 years. Her passion is to help makers to become more successful with their online endeavors by empowering them with the knowledge they need to take their business to the next level.