Inventory management deals with striking just the right balance between having enough inventory to meet the needs of your customers and not creating a surplus of inventory.
A business invests a significant amount of capital to acquire inventory. Therefore, it is of little value if that capital is locked away and forgotten in a warehouse.
The solution to this issue is to have an effective inventory management system that ensures that there is not an overflow of inventory, keeping your capital hostage.
An Inventory Management System Defined
The main duties of an inventory management system include keeping track of purchases, keeping track of the number of goods in stock, and ordering supplies when they get low. There are more advanced inventory management systems that can keep track of stock location and predict when it is the best time to reorder supplies. This can be accomplished by using a wide range of data, including weather forecasts and sales from the past.
Inventory management systems are versatile enough to either get integrated into your sales and purchasing systems or completely replace them. Inventory systems built for small businesses are able to run on a PC. The larger software suites can operate within the cloud or on the physical premise.
The Benefits Of Streamlining Your Inventory Management
It is not enough for an inventory management system to simply track what products you have bought and sold. A good inventory management system must be able to give you a bird’s eye view of your overall operations.
One of the worst things that you can tell your customers is that you have run out of stock. This could not only damage your reputation, but your sales can take a beating too.
A streamlined inventory management system can reduce the number of raw materials, products that are “˜work-in-progress”, as well as finished goods. This will help avoid having precious capital from being trapped in stock.
Having a streamlined inventory management system means reducing your costs in warehousing. That translates into renting just enough space for your inventory, without having to pay too much.
An effective inventory management system can also provide valuable insights as to which products should be deemed “fashionable” or “perishable”. This can be determined by knowing how long your products sit in your warehouse before they are finally sold. You can save money by reducing the amount of stock you purchase. Focusing only on what is being sold. This avoids trying to sell a product that has reached its expiration date.
A fact that is not universally known is that, although having an inventory management system is good for business, it’s actually the law. The ability to disclose what you have in inventory is a must and a “financial reporting requirement” in most jurisdictions.
How To Streamline The Management Of Stock
By streamlining your inventory management system, you are ensuring that you lessen the amount of expense on your operations while boosting your profit margins. Below are a few strategies that you can implement in order to streamline your inventory management.
Include More Detail Within Your Inventory Records
When it comes to gaining more understanding about your sales operations and inventory, tracking your lot numbers and your SKU numbers will help tremendously.
Also, consider investing in an Enterprise Resource Planning (ERP) Inventory Management System. This solution helps businesses to take care of all areas of their business on one platform. It includes inventory, planning, finance, operations, and logistics. The beauty of this system is that it also offers real-time inventory data for the entire business. It is the perfect solution for businesses that plan to grow, have intricate workflows, require advanced automation, sell numerous products, or just want to optimize their investments when it comes to their inventory.
All products within your inventory should be treated differently. They all have different costs, different customer demands, and methods of valuation. When you invest in an ERP solution, you will be able to keep track of inventory levels, every SKU’s pricing, as well as lead times. When your inventory levels have dropped dramatically low, your ERP solution should alert you. Once this alert is released, an automatic purchase order should be created and submitted to your vendors.
Vendors should be treated accordingly as well. Your organization is well aware as to which vendors can be relied upon, which deliver your products in the best state, and how to manage “expected receipt dates” and “actual receipt dates”.
Keep Sufficient Stock Levels
In order to come up with the most accurate sales forecasts, use statistical formulas. The results will help you forecast the levels of stock for each item within your inventory. It is vital that you maintain a “minimum in-stock count” for every product and vendor. This is especially critical if your vendor is known for having a “lengthy lead time” to send you their products. Having a minimum level of stock continuously just makes good business sense. Your ERP system can also assist you with tracking this information on both your items and your vendors.
Decisions Based On “Real-Time” Data
When you begin to implement an all-in-one platform solution like the ERP, you will be able to examine both sales operations information and your inventory in real-time.
This system will allow you to compare your sales forecasts, your levels of inventory, as well as purchasing costs. By having this information, you will be able to acquire the perfect framework for “inventory acquisition”, manufacturing needs, and lot sizes.
Streamline Your Inventory Management Process
As featured in this article, it is vitally important that your business takes the necessary steps to implement the aforementioned strategies to streamline your current system. It will ensure that your inventory management system is operating efficiently and effectively. If you need to take a step further, you can always hire a consultant to help you resolve any gaps in your current operations.