The Importance of Farm Inventory Management [+ 6 Ways To Manage It]

A successful farm-to-fork business is founded on two pillars:

Raising great high-quality plants and animals, and
Preparing, storing, scheduling, and selling your products efficiently

That second pillar is where a lot of small family farms have trouble keeping up with larger competitors — but it doesn’t have to be that way.

The popularity of farm-to-fork and local grocers has highlighted the increasing importance of farm inventory management for smaller farms. In recent years, industry-specific inventory management tools have helped level the playing field for small and mid-sized farms, helping them cut costs, reduce losses, and increase efficiency.

In this post, we’ll give you an overview of farm inventory management, why it’s important to adopt best practices now, and some practical tips you can use on your farm.

What Is Inventory Management?

In the retail industry, inventory management refers to the tools and practices used to maintain and optimize product stock levels. For farms, “inventory” has a slightly wider definition. Everything you use to do business — from raw materials and equipment to meat and packaging — falls under the inventory umbrella.

Some common examples of farm inventory include:

Fertilizer
Seeds
Tractors, ATVs, and other equipment
Butchered meat
Produce
Feed

…and more.

Each category of inventory is generally tracked separately — between short-term, sellable assets (meat products, fertilizer, eggs, etc.) and long-term investments (equipment, machinery, etc.).

Why Is Inventory Management Important for Farms?

Tracking farm inventory might seem tedious, especially when keeping up with your daily field operations. However, the importance of establishing a farm inventory management system can’t be understated.

Effectively tracking inventory is a key component of driving growth. It will help you optimize your production, shipment, and storage of goods. This becomes even more vital for farmers, who primarily deal with perishable goods, which is already challenging to manage, even in more stable retail spaces like grocery stores.

Here are some of the key benefits of implementing a farm inventory management system:

Decrease the risk of inventory shortages: With an accurate view of inventory, you can better predict which items are selling and use those insights to make better decisions. The goal of inventory management is optimization — in other words, not overstocking or understocking anything.

Improve agricultural management: For farms growing fruits and vegetables, inventory management can give you insights into the germination rates of different seeds. If you’re buying seeds, you can also compare how different suppliers’ crops perform, both in the plant’s health and with customers.

Enhance operational efficiency: With a comprehensive view of all of your farm inventory and operations, you can easily manage vendors, purchase orders, customer orders, and more, all in one place. With less time spent on data entry and tracking down inventory, you can focus more on your farm and your customers.

Improve cash flow: Inventory management solutions help optimize all aspects of operations, such as purchase orders, order fulfillment, decreasing overheads, and increasing sales.

Better compliance and traceability: Selling and growing food comes with unique legal requirements and restrictions. Inventory management will allow you to quickly show you’re in compliance and spot any issues before they become a problem.

Improved decision-making: With more data on how your farm operates, you’ll have an unbiased view of your farm’s strengths and weaknesses. This will arm you with information you can use to make better, more informed decisions about your business.

Optimize Your Farm Inventory Management: 6 Tips

The hardest part of creating a farm inventory management system is getting started. Though you might have some growing pains — it’s worth it.

Having a solid understanding of farm inventory best practices is your first step towards better meeting customer demand, selling online, and expanding your reach.

Here are six tips you can use today to optimize your farm inventory management:

1. Start With the Basics

If you don’t track your inventory, the time to start is now. As you grow, it’s important to know exactly how much stock you have at any given time.

Review everything on your farm, then log and categorize your products and equipment, tracking the information in a logbook, spreadsheet, or (ideally) inventory management software. Separating the various types of products and equipment in your inventory is vital to accurately measuring your cost of production and overhead expenses.

Knowing when you received certain inventory is also useful for tax purposes. When you buy certain products, you might not use them straight away. For example, you might not plant and harvest seeds you bought in the fall until the spring (but you can still write off the purchase of the seeds for the previous years).

Inventory Tip: Keeping accurate records of all of your assets is helpful when applying for bank loans and other forms of financial assistance as it shows a keen understanding of your operating expenses.

Since it’s so time-consuming and error-prone, manual inventory tracking isn’t ideal — but it’s still better than nothing. Tracking all of your raw materials, inputs, equipment, and stock is the first step toward creating a clear picture of your farm’s expenses and cash flow. This information will help you make more informed decisions as your business grows.

2. Choose the Right Software

Inventory management software is a must to deliver the farm-to-fork experience customers expect and scale efficiently. However, there are many inventory management solutions on the market, each with unique features, strengths, and weaknesses.

Which one is right for you?

Start by evaluating your farm’s needs, challenges, and goals. What do you hope to be able to do immediately after the system is implemented? What about in six months or a year?

There are other questions to consider as well. Are you already using other software to run your business? Do you need a mobile solution that can update inventory offline? Are there aspects of your existing system that are falling short of expectations (for example, not being able to sell by weight)?

Asking these questions before you start your search will make it much easier to filter out the features you do and don’t need. Generally speaking, a great farm inventory management system should include:

User-friendly interface: Just because inventory management software is powerful doesn’t mean it should be complicated. Look for an inventory management solution that is intuitive, doesn’t require a lot of technical know-how, and provides ongoing support.
Customization: Look for software that can be customized to fit your specific farm operations, whether it's selling by weight, managing unique products, or tracking perishable goods.
Scalability: Ensure any software you pick is equipped to grow with your business. As your farm expands, the software should be able to handle increased inventory without compromising performance or adding complexity.
E-commerce capability: Many farm-to-fork businesses thrive through a mix of in-person and online sales. Make sure your inventory management system can sync stock levels between your warehouse and online store.

3. Perform Regular Audits

Once you have an inventory management system in place, consistency is key. Use your farm point of sale (POS) or inventory management software to schedule regular inventory audits (e.g., monthly or quarterly) to make sure what’s in your physical storage matches the recorded data.

Audits will help you find discrepancies and identify potential problems, such as inventory getting lost or spoiled. For high-value or fast-moving items, we recommend random spot checks to ensure that the stock of your most popular items is accurate.

Once you perform an audit, it’s time to reconcile your inventory. This ensures that your data remains accurate. Over time, if you continue to see discrepancies, it may be a sign of shrinkage, either from inaccurate data entry or (in rare cases) employee theft.

4. Offer Training and Support

The importance of farm inventory management might be clear to you but remember: any inventory management system is only useful if it’s used consistently. Make sure anyone who is stocking or moving inventory knows how to use your system correctly to avoid errors and prevent loss.

Provide comprehensive training for your staff to make sure everyone is comfortable using the system. If issues arise, address them with the software provider before it becomes an issue. Some inventory management software also includes training modules for new staff, which can be especially helpful for seasonal help.

We know keeping on top of changes and software updates can be a pain, but updates are necessary to ensure your system is fully compliant, secure, and follows best practices. If you’re on a subscription-based model, your software might even get some new and useful tools with a new update.

The need to keep yourself and your staff trained and up to date highlights the importance of ongoing vendor support. Make sure to work with software vendors that don’t just set up a system and leave you to it — but are there to support you as your needs change or challenges arise.

5. Take Advantage of Data and Reports

Tracking sales data, demand, inventory churn, and other metrics might seem like something only big-box brands have the resources for. That’s simply not true.

These days, thanks to farm-specific POS and inventory management software, even family farms have access to robust reports that give them quantifiable insights into their business.

Use analytics tools within your inventory management software to identify trends in inventory usage and sales. Some solutions also support predictive analytics, which helps forecast future inventory needs based on historical data (e.g., your peak seasons, most popular items, online vs. in-person sales, etc.). Tracking these types of metrics helps reduce the risk of stockouts or overstocking.

Implementing farm inventory management will also let you track key performance indicators (KPIs) such as inventory turnover rate, order accuracy, carrying costs, and more. These will help you identify inefficiencies and other areas for improvement within your inventory management process.

6. Focus on Scalability

Growing a farm business can be intimidating since the bigger it grows, the more complex it gets. One of the essential aspects of farm inventory management software is that it helps streamline processes and takes the complexity out of your day-to-day so you can focus on more important issues.

If your goal is to scale your business, we recommend finding an inventory solution that can grow with you. Find solutions that are:

Modular: Systems that allow you to add necessary features as your business grows.
Cloud-based: A system that gives you maximum flexibility by allowing you to work from anywhere and increase data volumes without investing in new hardware.
Integrated: Find software that can integrate with online sales, accounting software, and other farm management tools you may be using to combine all of your workflows.

Grow With Confidence Using Best-In-Class Inventory Management for Farms

What’s the importance of farm inventory management? It’s a fundamental first step that gives you a bird’s eye view of your farm’s operations and sales process — and that allows you to extend your reach to new customers and grow with confidence.

Adapting to evolving customer expectations and technology can be intimidating. That’s why it's essential to choose a technology partner who understands your business.

GrazeCart’s farm POS system includes integrated inventory management, allowing you to combine all of your farm’s business operations into one system. Built by farmers, for farmers, we seek to simplify your day-to-day while giving you advanced but cost-effective tools that help you thrive.

Try your free 14-day trial today to see how GrazeCart can transform your business with modern farm inventory management.