The success of any business, whether small or big, relies on several different factors. However, these two types of companies have one thing in common: the consistency of products. A good inventory management system helps your company match the demand for goods by customers.
Companies that are not aware of their inventory on hand cannot make good order decisions. Without a good checklist, you cannot identify the amount you need for each product. It leads to stocking an incorrect number of products.
What is Inventory Management?
Inventory management comprises processes and practices in the supply and demand chain used to track the amount of stock in the warehouse. The main goal of an inventory management system is to help you identify where inventory is and how much is available to manage the levels appropriately.
An inventory management system is different from an ERP system as it focuses on the supply chain process. Inventory management systems can integrate with other software such as point of sale, shipping, and channel management.
Types of Inventory Management
Barcode Inventory Management
A barcode system is a technology that assigns a unique number to each product. This technology helps businesses create a relationship between different data points, such as
- Supplier information
- Product dimensions such as weight
- Amount of products in stock
Periodic Inventory Management
This system uses inventory valuation to develop financial reports where the company performs physical counts on the inventory at specific intervals. The process involves counting the inventory at the beginning of the period, adding it to the purchases made during the period, and subtracting the final stock amount to determine the cost of goods sold.
RFID Inventory Management
Radio Frequency Identification is a wireless system that transmits any product’s identity using a unique serial number. This particular number helps to track and provide information about the product.
The RFID system improves efficiency and inventory visibility in most warehouses.
Benefits of Inventory Management
- Good inventory management improves the supply chain process and enhances reliability.
- It helps to minimize losses due to untraceable sales
- It reduces costs by allowing you to purchase only items that are needed
- It helps keep track of the amount of stock and identify the right time to order more goods
Before going into details about inventory management, it is vital to understand the different inventory types. Below are some of the main types of inventory:
- Unfinished products- these are goods that are still in the processing stage and cannot be sold
- Raw materials- these are products used in the manufacturing process
- Final products- these are finished products found in warehouses awaiting shipment to their destination
- Goods on transit comprise items that have already left the warehouse but are yet to reach the final destination
- Cycle inventory are items waiting to be delivered by the manufacturer and then sold to customers immediately
- MRO products are goods that support the production process
- Anticipation inventory is excess goods waiting for a surge in the sale
- Buffer inventory is a safety stock that cushions when an unexpected need for more inventory arises
Tips for improving the Inventory Management Process for Your Company
Technological advancement is responsible for globalization and consumers’ purchasing preferences. Due to these changes, businesses need to improve on their inventory management. Suppliers are using technologies that provide a clear picture of how to improve the supply chain.
These technologies enable them to predict logistics anomalies before they occur. Here are some of the best ways to improve your inventory management.
1. Hiring an Inventory Control Personnel
Employing a dedicated inventory manager is a practical method of improving the operations of the inventory management system. Inventory managers are qualified people responsible for the management f the business’s products. They keep track of the available merchandise and those that are in transit.
They are also responsible for effecting adjustments caused by factors such as return orders. In addition, they follow up on whether the goods have been delivered and prepare inventory reports.
2. Use of lead Reports
The use of lead reports is vital in understanding the lead time. Lead-time is the period a re-ordered inventory takes to arrive. Suppliers have varying delivery periods for their products. Therefore, manufacturing lea reports can help provide a clear picture of the best time to refill your stock.
3. Make use of Inventory Management Software
Small companies or stores can manually keep track of their inventory using spreadsheets and notebooks. However, manual tracking becomes difficult as the business grows, acquiring a more advanced inventory management system.
There are different inventory management software in the market. However, not all inventory applications are best designed for your company. It is essential to review the additional software to help you establish the best database for your company.
A sound system allows for customization that fits into the company’s needs. Visit Sonary and get some of the best inventory management software.
In addition to the system, it is vital to integrate a technology that helps manage your stock. These technologies include point-of-sale systems and scanners to help you keep track of your inventory. A POS system that communicates with the inventory management software saves time by reducing the need to transfer the data to another plan.
4. Install a Tracking System
As a business owner or manager, it is essential to keep track of your daily operations. This process involves more than just the sales made at the end of the day. It incorporates different aspects such as:
- Number of items sold
- What specific items were sold
- Provide an update on the inventory amount
Most successful businesses own a dedicated tracking system that helps monitor the turnaround periods. These tracking technologies come in varying options, such as spreadsheets and computer software. The programs take control of the whole inventory process. It allows entrepreneurs to facilitate their production levels and perform cycle counts in their warehouses or distribution centers.
5. Seeking help from Suppliers
You can seek help from your suppliers to manage your inventory. It allows you to access the distributor’s inventory data using the supplier-managed list. All orders made by the vendor can be generated when the need arises.
Distribution-intensive companies utilize inventory by managers to clear any mistakes made during data entry.
6. Keep track of Inventory levels
High inventory levels increase your expenses, which affects the overall operational costs. It is vital to keep track of your inventory to help avoid investing in various unnecessary products.
7. Make use of an Inventory Consultant
Most companies hire inventory consultants who do not form part of the company staff to save on cost. These consultants’ primary role is to oversee the internal inventory systems. These consultants are hired only when needed and paid for their services rather than receiving a monthly salary.
Some of their main jobs include; ensuring accuracy, keeping track of order-picking operations, and periodic counting.
8. Using Customer Delivery Information
Companies can use customer delivery to determine the best way to manage inventory turnover and delivery turnaround. This process combines how you weigh and gauge your inventory requirements and the period it takes for goods to reach the client.
9. Ensure consistency during Stock Purchasing
It is easy to assume that employees record any incoming inventory into the system. However, it is essential to have a standard process followed by everyone. Leaving each employee to receive and process s any incoming stock can be detrimental to your company due to several discrepancies.
It is best to ensure that all staff in the inventory department uses a similar technique to receive any incoming stock. The team should verify each box to maintain a high level of accuracy.
10. Personally perform the Restocking Processes
Most companies use vendors to perform restocking on behalf of the company owner. It may seem like an excellent move to help save time and release some burden from your staff. However, it is important to note that vendors do not have similar priorities as you.
Their main aim is to sell their items while you aim at stocking items that bring more profit to your company. It is best to monitor your inventory and decide on purchasing the best items.
Inventory management is an essential aspect for all businesses, regardless of size. However, due to technological advances and changes in consumer preferences, it is advised to use an advanced system. It will help your company keep track of your business operation pattern.
Business owners can adopt different techniques to help improve the inventory management process. These steps make the system more effective and attain the overall business objectives.