Every great business relies on various aspects to ensure its success in the industry. Companies need to incorporate different systems to allow them to run their daily activities smoothly. The success of your business does not only rely on the marketing strategy or social media presence. A sound inventory management system is another central aspect that drives your business to great success.
Small businesses such as retail shops may not require a complex system. Owners may perform inventory management manually without a computerized system. However, as the business grows, the order volume increases. This increase in volume creates challenges in fulfilling multiple orders. Therefore, it calls for the need to automate your inventory management to be able to manage all these processes.
Why shift from Manual Inventory Management?
Manual inventory management comes with many challenges. You must perform all actions from processing orders from each channel and doing stock counts regularly across each group. This process takes a significant amount of time, especially if it is a big company.
The time spent performing all these activities could be channeled into building the business. It is also prone to errors since performing stock reconciliation manually is difficult. It slowed down the reordering process leading to depleted stocks and missed sales.
A recent study estimated a 25% increase in firms incorporating better inventory management techniques.
Manual inventory management is also prone to human error. It can lead to overselling, ruining your reputation and overall budget. It also puts your business at the risk of missing valuable sales by failing to reactivate listings if the product is back in stock.
All these challenges can be addressed by adopting an automated inventory management system. Therefore, before learning about the benefits of good inventory management, it is important to understand the meaning of inventory management.
What is Inventory Management?
Inventory management plays an essential role in the supply chain. It allows you to monitor the sales, storage, and acquisition of goods. The ability to identify the position of each product gives you the chance to watch the stock levels at any time.
It helps better manage your inventory and transforms it from a manual and challenging process to the core aspect of your business growth plan.
Factors to Consider When Choosing An Inventory Management
When selecting a system within a wide range of applications, it is best to take time and ask yourself some critical questions. These questions will help you narrow the search area to a specific decision. Some of these factors to consider include:
- How big is your business?
- Do you have enough money to acquire a new system?
- What is the most appropriate deployment strategy for your company?
Benefits of Inventory Management for Businesses
It is essential to check whether your current inventory management practices positively impact the business. It is best to change the whole strategy and adopt a new one. A recent study estimated a 25% increase in firms incorporating better inventory management techniques.
This increase is because of the benefits associated with improved inventory management.
1. It Improves Accuracy and Efficiencies
A recent study established that most inventory systems used by retail businesses are only 63% accurate. This is a low number for your business to succeed as it could damage your business. One of the main benefits of good inventory management is that it helps minimize the stock that firms need to keep in hand and improves accuracy.
By reducing the inventory in hand, companies can save up more costs ad effort. Most companies that have adopted modern inventory management techniques close down some of their warehouses, helping them save on costs associated with these centers.
A recent study established that most inventory systems used by retail businesses are only 63% accurate.
The emergence of advanced inventory tracking software has brought about just-in-time inventory. This inventory technique involves a firm tracking its stock at different levels. As a business owner, you can take advantage of the features and benefits of inventory tracking software to allow you to keep accurate records of your stock. It could help boost your return on investment.
2. It Reduces Overall Operational Costs
Improved accuracy leads to fewer errors. Companies with a poor inventory management system are prone to several errors. These errors require money to fix hence increasing the overall operational costs. A good system reduces errors, which reduces the expenses incurred to correct the mistakes.
A sound inventory management system also reduces the need to house unnecessary items. Good inventory management helps identify the consumption pattern allowing you to stock the right things. It helps to offer a more expansive room for necessary products and reduces the amount spent on holding stock.
An automated system helps in the management process and saves money and time. You will need fewer employees to pick, pack and prepare goods for delivery.
3. It Enhances Data Visibility and Planning
The business intelligence value is an important aspect to consider when introducing a new inventory management system to the company.
Features such as barcode scanning allow for easy and accurate transfer of data. Together with a centralized data warehouse, firms can create their data assets and analyze the operations of a business.
The availability of this information helps to answer questions such as:
- What is the location of the deliveries?
- What type of goods are being delivered?
- How will automated inventory management help improve these processes?
- What information does the customer demand tell the company?
- How does this information help the overall marketing operations?
Business intelligence is crucial in the modern world. It enables companies to improve their marketing strategies, which boosts sales. Therefore, good inventory management is beneficial to both the production and marketing of a company.
4. It Prevents Excess Stocking and Stock-Outs
Balancing stock amounts can be difficult and daunting. Inventory managers must deal with this challenge daily. Filing to perform inventory checks can result in excess stock or lack of supply. Both scenarios harm the business.
Failure to order enough goods can cause stockouts that could lead to late delivery, causing a bad reputation among consumers. Having an excess stock also eats up valuable space in the warehouse.
Inventory management helps to prevent these events from taking place. It helps you set reorder points within the system for goods that need frequent reordering. Since most people are unaware of how to implement this feature, most automated systems can calculate using data from your company to set reorder points.
5. It Improves Customer Service
Good customer service is vital to the success of any business. Happy clients build a good reputation for a company by giving positive reviews. One way of building good customer relationships is by offering timely deliveries.
Good inventory management will help boost and raise awareness among your customers. Improving accuracy ensures proper product delivery to the correct location. Some applications also have real-time features that provide information to the customer about the stage of their delivery.
Providing clients with access to the information about their deliveries saves you on receiving calls asking about the whereabouts of the goods.
6. It Replaces Time-Consuming Tasks
Most companies are inventing new ways to save time and reduce costs. Good inventory management gives a good chance for companies to achieve these goals. Some of the processes businesses use to reduce costs and save on costs include barcode scanning, which may be labor-intensive when done manually.
These technologies help t automate most manual processes, such as inputting each product individually into the system. Once most operations are automated, employees get more time to concentrate on other essential activities to help achieve the overall business goals.
7. Allow Coordination between Different Locations
Well-established firms adopted inventory tracking during its early stages. These systems were integrated with other systems that assist with enterprise resource planning. Inventory management helps in the coordination of the operations between different warehouses.
Other systems can also help companies manage their operations within multiple locations. For example, for a company with more than 15 warehouses, inventory tracking can help to provide better analysis for each warehouse for future decision-making processes.
Final Verdict on Benefits of Inventory Management
This article describes the benefits of having a good inventory management plan. Good inventory management helps a business attain most of its operational goals and increase sales. As technology increases, companies will adopt advanced systems to better business management.
However, finding the right inventory management for your business might be challenging. The type of goods being traded by a company dictates the choice of the system to use. Choose some of the best inventory management tools by going through different reviews online.