Inventory efficiency is how little time, space and handling your stock needs between the supplier's van and the customer, with records that match the shelf. In a small shop, most of the waste is staff time spent receiving, searching the store room and counting. Time those jobs for a month, and the slowest one shows you where to start.
This guide shows how to time the four jobs and what eight common techniques save. It also sets out a store room, with a worked example in naira.
Find where the time goes first
Time four jobs before you change anything: receiving, storing, finding and counting. Write down how long each takes and how often it happens.
| Job | What to time | The measure |
|---|---|---|
| Receiving | From the van's arrival to the goods counted and in the records | Minutes per delivery |
| Storing | Putting goods away, with old stock moved to the front | Minutes per delivery |
| Finding | Each trip to the store room for a product | Minutes per trip, times trips a day |
| Counting | A full count, or each day's section count | Staff hours a month, and hours closed |
The root problem is usually one of three: no fixed place per product, deliveries not checked against an order, or counts that shut the shop. Overstock makes all three worse: every extra carton is one more to move and count. How to avoid overstocking and stockouts covers the buying side.
For example: one Lagos shop's month, timed
For example, a mini-mart in Lagos timed its stock work for a month of 25 trading days. Its staff time costs ₦800 an hour. The figures are an illustration, not a real shop's.
| Job | Before | After | What changed |
|---|---|---|---|
| Receiving 12 deliveries | 12 hours, at 60 minutes each | 5 hours, at 25 minutes each | Checked against a purchase order and scanned in |
| Finding stock, 24 trips a day | 40 hours, at 4 minutes a trip | 15 hours, at 1.5 minutes a trip | A rack code for every product, fast sellers by the door |
| Counting | 15 hours: 3 staff for 5 hours, shop half closed | 10 hours: 24 minutes a day | One category counted each day |
| Total | 67 hours, ₦53,600 | 30 hours, ₦24,000 | 37 hours saved |
The shop saves 37 staff hours, about ₦29,600 a month, and no longer closes for half a day to count. The biggest saving came from finding stock, the one job nobody had timed.
8 proven inventory management techniques, and the handling each saves
Each technique below cuts handling in one of the four jobs, and two of them are accounting choices that only look like shelf rules. The measure tells you whether it worked.
1. FIFO: first in, first out on the shelf
Put new stock behind old, so the oldest sells first and nothing ages at the back. The USAID Logistics Handbook says old stock should be "moved or rotated to the front of the shelf", with new stock at the back.
For goods with a date, go by expiry, not arrival: first to expire, first out. Measure it by the value written off as expired each month; FIFO vs LIFO covers the accounting side.
2. LIFO: an accounting method, not a shelf rule
LIFO assumes the newest stock sells first, and on a real shelf it leaves old stock to expire. As a costing method it is not permitted under IFRS for SMEs, paragraph 13.18, so a shop reporting under IFRS cannot use it (IFRS Foundation, Module 13).
3. JIT: just-in-time deliveries from reliable suppliers
Smaller, more frequent deliveries mean less to put away, store and count. JIT only works when the supplier delivers on time; with unreliable deliveries, keep a buffer. Measure it by days of stock on hand.
4. EOQ: economic order quantity, counting receiving time
EOQ balances the cost of placing and receiving an order against the cost of holding stock (Investopedia). Count staff time at receiving as part of the ordering cost. The quicker a delivery is to receive, the smaller and more frequent your best orders become; economic order quantity works the formula.
5. Average costing, so receiving needs no batch prices
Weighted average cost gives every unit of a product the same cost, recalculated when new stock arrives. Staff don't track which delivery's price each sale used, and IFRS allows it alongside FIFO.
6. Cycle counting instead of closing to count
Count one category or shelf each day, so every product is counted over a month without shutting the shop. In the Lagos example, this cut counting from 15 hours to 10 and ended the half-day closure. How to perform an inventory cycle count sets up the rota.
7. ABC analysis for placing and counting
Rank products by what they earn, as the 80/20 rule in inventory shows. A items, the few that bring most of the money, go nearest the till and are counted weekly. C items go higher and further back, and are counted monthly.
8. A perpetual inventory system
Every sale, delivery and return updates stock as it happens, so you count to check the records, not to create them. A barcode scan at the till does the updating; see what is a perpetual inventory system.
How should a store room be set out?
Give every product one fixed, labelled place, and keep the fastest sellers nearest the door. Staff then walk to a code instead of searching.
- Label racks and shelves with short codes such as A1, A2 and B1, and record each product's code.
- Keep cartons off the floor and away from walls. The Handbook says to stack cartons "at least 10 cm (4 in) off the floor, 30 cm (1 ft) away from the walls and other stacks".
- Stack no higher than 2.5 metres, the Handbook's limit before bottom cartons crush.
- Turn labels and expiry dates outward, so a count needs no lifting.
- Keep a marked spot for damaged and expired goods, away from stock you sell.
The gap from the wall lets air move and lets staff walk round the stacks. That space is what makes counting and first-to-expire rotation quick.
How to receive a delivery in half the time
Check the delivery against a purchase order, not against the driver's note. The Handbook's point holds for any shop: stock received but not inspected, recorded and put on the shelf is not yet available to sell.
- Count cartons against the order before the van leaves, and open a sample.
- Note short or damaged goods on the delivery note, and have the driver sign it.
- Scan or label each product, then record the goods the same day.
- Put away new stock behind old, in its coded place.
Measure it in minutes per delivery. The Lagos shop went from 60 minutes to 25 by receiving against an order and scanning.
How to Choose the Right Method
Start with the technique that fixes your slowest job, then add the next. The table matches common problems to a technique and its measure.
| Your problem | Start with | Measure |
|---|---|---|
| Goods expire or spoil at the back | FIFO, or first to expire first out for dated goods | Value written off each month |
| Staff search the store room | Rack codes and ABC placement | Minutes per trip |
| Counts close the shop | Cycle counting | Hours closed per month |
| Records never match the shelf | A perpetual system with barcode scanning | Share of counted lines that match |
| The store room is always full | Smaller, more frequent orders (JIT, EOQ) | Days of stock on hand |
| Month-end bookkeeping takes days | Average costing | Hours to close the month |
You don't need all eight at once. The Lagos shop started with rack codes, because finding stock took the most hours.
Tools to Make Inventory More Efficient
A tool saves time only if it removes a step: retyping, searching or recounting. Look for these five things:
- Barcode scanning at the till and at receiving, with labels printed for goods that arrive without a barcode.
- A rack or shelf location for each product, shown on reports.
- Count sheets by warehouse and category, and adjustments that record why stock changed.
- Low-stock alerts per product and per branch.
- Sales, purchases and stock in one place, so online orders take stock from the same count as the counter.
How to make inventory more efficient in ArmPOS
ArmPOS handles the four jobs from one set of records, in the browser on a phone, tablet or computer.
- Receive against the order. Record the purchase as ordered. When the goods arrive and check out, edit it to received, which adds the stock (Record a purchase from a supplier).
- Label what arrives without a barcode. Print Labels, on the purchase's menu or under Products, prints each product's name, code and price (Print barcode labels).
- Give every product a place. Add rack codes in Settings › Warehouse Locations and fill each product's Internal Location. The Internal Location Report lists products by rack (Your warehouse and its locations).
- Count a category a day. Products › Count Stock makes a sheet for one warehouse and category, and an adjustment corrects the differences (Count and adjust stock).
- Keep losses apart. Record broken and spoiled goods as damages, so count corrections show only counting errors (Record damaged or spoiled stock).
- Sell the earliest expiry first. For batch-tracked goods, the POS lists the batch expiring first at the top (Batches and expiry dates).
- Scan at the till. A USB scanner or the device's camera puts the product in the cart, and the sale takes it off stock (The POS screen).
See what ArmPOS includes for shops in Nigeria.
Frequently asked questions
What is inventory efficiency?
It is how much time, space and handling your stock needs from delivery to sale, with records that stay right. An efficient shop receives, stores, finds and counts stock in fewer staff hours.
How do you measure inventory efficiency?
Time the handling jobs: minutes per delivery, minutes per store room trip, and counting hours a month. Pair them with inventory turnover, which shows how fast the stock itself moves.
How often should a small shop count stock?
Count a section every day or week, so each product is counted at least monthly and A items weekly. Keep one full count a year for the accounts.
Is FIFO or FEFO better?
FEFO, first expired first out, for anything with a date on it. For goods without a date, FIFO is all you need.
What is the quickest way to make inventory more efficient?
Give every product a fixed, labelled place. In the Lagos example, finding stock took 40 of the 67 hours.
Time your four stock jobs this week and fix the slowest first. To scan, label, place and count your stock in one system, create a free ArmPOS account.
