73% of retailers utilize forecasting tools to improve their inventory accuracy. The nonprofit sector can do the same. Inventory management is crucial to ensure nonprofits can operate at peak performance, helping as many clients as possible. However, the needs of retailers and nonprofits are not exactly alike.
Nonprofits do much more work with far fewer resources, so they're usually further behind with technology adoption. Without tools such as nonprofit inventory management software, it's difficult to know how much of a certain resource will be necessary in the future. Of course, nonprofits have to watch their budgets closely, particularly when they have grant money that must be allocated to a specific initiative.
If your nonprofit is struggling with inventory, keep reading to understand better the challenges you're facing and how best practices can alleviate the stress on your resources.
Importance of Inventory Management in Nonprofits
Every nonprofit has a mission statement and goals that they wish to achieve. However, they need resources to accomplish these objectives, whether it's medical supplies for an organization like the Red Cross or non-perishable goods for a food bank.
Organizations must keep a minimum amount of resources on hand at all times in their inventory. Management of these items is critical to:
- Stick to financial restrictions: Managing inventory allows nonprofits to purchase the correct amounts of each product. This reduces storage needs and prevents extra expenses, like faster shipping.
- Create happier donors: 75% of Americans donate to causes they personally believe in. An inventory shows donors that your organization is responsible with the funds they have given and serious about the cause, encouraging them to continue the relationship with your organization.
- Increases impact: Efficient inventory tracking allows you to use donated items to their full capacity. If someone in need comes asking for a specific item, you can know if you have it or not immediately.
- Save more time: Inventory management software can automate ledgers, stock updates, disbursements, and more, freeing up your team to work on mission-oriented tasks.
- Lower risk: Up-to-date systems ensure that you never run out of stock on a critical item, and you can create recurring shipments to maintain a plentiful supply.
- Improved program planning: Keeping all of your data in one system, such as inventory management software, helps you see the big picture of what is possible with your resources through data-driven insights.
Nonprofit Inventory Challenges
92% of nonprofits spend less than $1 million dollars annually. That means that each dollar has to go a long way to support their day-to-day operations. Resource tracking for nonprofits is critical to ensure that each dollar is spent in the best way possible. However, when operating on such a low budget, it can be hard to dedicate time to best-picture thinking, making it difficult for an organization to adopt new procedures and policies, such as optimizing inventory.
Some of the common challenges for nonprofit inventory management include:
- Limited resources: Sometimes, a nonprofit simply doesn't have the money to maintain the stock needed to operate at peak performance. Adding a tool to manage inventory seems like a valuable dollar that could go to another initiative.
- Unpredictable demand: A nonprofit may have a surge in need surrounding extreme weather events or health crises such as the COVID-19 pandemic. Events such as these can be nearly impossible to plan for fully.
- Outdated tools: Nonprofits may struggle with the adoption of new tools because of the price, even if the new system would save them money in the long run.
- Operational inefficiency: Manual methods like spreadsheets leave room for human error.
Best Practices for Nonprofit Inventory Management
Poor inventory management causes businesses to lose up to 11% of their annual revenue due to under or overstocking items. By taking a look at systems and revisiting workflows, your team can create nonprofit inventory management guidelines that save time and money.
1. Fill Out a Needs Assessment
Before you can create a better system, you need to figure out what is wrong with your current nonprofit inventory management. Schedule a time with the people at your nonprofit involved in inventory, and ask the following questions:
- What are our current inventory requirements?
- What level should each of these items be at all times?
- How often do we use each resource?
- How much time do we need to obtain each resource?
- How much storage do we have? Can we get more, and how much would that cost?
- What are our financial limitations? How much can we spend each month?
Rather than trying to tackle this whole list at once, set aside 30 minutes to an hour every day or every other day until completed.
2. Choose an Inventory Tracking System
Use your needs assessment to create an inventory tracking system to provide real-time visibility into inventory levels, location, and usage. If your organization is small and strapped for cash, you can use a free tool like Google Sheets. However, manual tracking leaves you at risk for manual errors, which can be incredibly costly. It's beneficial to pay for technology for nonprofit inventory.
Consider cost-effective inventory management software like Plan Street. This software solution offers a paperless process with user-friendly dashboards, quick disbursement with QR codes, and a robust inventory tracker. You can see real-time, up-to-date information about what items are in stock by the category that works best for you, including bar codes, product names, descriptions, and more.
You'll also want to choose the overall method by which you'll decide to manage your inventory. There are a few common practices to consider:
- JIT (just-in-time) inventory: Only stock the amount that you need to meet the current demand of your clients. This method is ideal if your nonprofit has limited storage on-site.
- FIFO (first-in-first-out) inventory: This method means that your nonprofit uses the items as they are acquired. This method is best used for nonprofits with perishable goods, such as a food pantry or meal center.
- EOQ (economic order quantity) inventory: Follows the Economic Order Quantity Formula to stock inventory, which is best for nonprofits with consistent needs.
3. Outline Policies and Procedures
Once you have your system, you must figure out how it will be implemented. Create a document that details the expected policies and procedures for using the software. This should include documentation such as:
- Guidelines for inventory storage, tracking, and ordering.
- Methods for identifying and reporting inaccuracies.
- Inventory audit standards.
- Reorder thresholds.
- Automation to implement to quicken these procedures.
4. Train Your Staff and Volunteers
Every staff member must understand the procedures. Send out copies of the guide and schedule training sessions to ensure everyone is up-to-speed. Stress that it is a learning process, and the implementation will take time.
5. Establish Relationships With Suppliers
Collaborative relationships with suppliers can help ensure your inventory arrives on time. Remain in close contact with the heads of each supply company to establish an efficient ordering and delivery process, negotiate the cost of items (especially when purchased in bulk), and improve the shipping and delivery time of your goods, preventing delays in the nonprofit supply chain.
Always ask if there is an option for discounts with suppliers or if they have programs that benefit nonprofits. For example, animal rescues can have their resource wish lists added to Chewy's rescues, where shoppers can purchase those items on your behalf.
6. Optimize Systems With Inventory Management Software
Once you've created your policies, it's key to continue to iterate on them. Use analytics and reporting features to track outcomes from your newly established inventory policies and procedures. Analytics software like PlanStreet offers:
- Easy-to-read reports.
- Tailored reporting building to glean the exact information needed.
- One-click report generation.
- AI-powered services.
These reports help you better understand your inventory needs, helping you best allocate your resources.
7. Share Excessive Resources With Other Nonprofits
Putting the community first is critical for nonprofits. Building your network of nonprofits near you with similar goals can be a great way to extend the reach of your mission. Say you bought snacks for your volunteers that are now near the expiration date. Rather than throw them away, you can donate them to a local food pantry. By managing your inventory, you can ensure that every item gets used, even if it's not by your organization.
Increase Efficiency in Inventory Management With PlanStreet
When shopping for inventory management software, you want a solution that best works within your budget. Consider working with PlanStreet. Our robust inventory management software comes with a custom licensing plan that can be molded to fit your team's exact needs.
Every subscription includes:
- Access to all new features and releases.
- 24/7 support.
- Around-the-clock monitoring by experts.
- HIPAA-compliance.
Schedule a live demo today to learn how PlanStreet's real-time inventory tracking can elevate the work of your nonprofit.