Everyone who manages a company that is part of the supply chain is aware that having inventory is one of the most crucial methods for a corporation to make money. Maintaining proper records of your inventory can have a significant influence on your company’s revenue and profitability; failing to do so could be detrimental to the success of your company. It’s never a good feeling to have to tell customers, “We’re out of stock,” especially because doing so might affect your business’s reputation and revenue in ways you can’t even begin to understand.
It doesn’t matter if you own a fledgling company or a well-established one, a single website or a number of consignment shops and retailers; inventory management assists you in monitoring and exercising control over your supplies and stocks regardless of the size of your operation. Additionally, it assists you in managing and optimizing both your sales and inventory levels. You will gain a better understanding of inventory management, the disciplines that go along with it, as well as some of its most significant components, by reading this article. Therefore, let us have a brief look at it.
What Is Inventory Management?
An integral component of running a smooth supply chain is keeping track of stock. Managing an organization’s product inventories is known as inventory management. To keep up with client demands, firms in retail, wholesale, logistics, and other industries need effective inventory and warehouse management. Simply said, it’s the process of monitoring and improving all aspect of a company’s operations in tandem. Inventory management aids companies in determining what to order, how much, and when. It monitors inventory from the time it’s purchased until it’s finally sold.
The method monitors and adjusts to patterns to prevent inventory levels and give customers advanced warning of any impending supply problems. The sale of stock generates revenue. In the interim before it sells, stock consumes capital. Having an excessive amount of stock therefore wastes capital and impedes the movement of cash. One indicator of efficient stock management is the turnover of physical inventory.
A company’s ability to sell its inventory during a certain time period can be gauged by looking at its inventory turnover rate. For obvious reasons, a company should avoid stockpiling more goods than they can move. Deadstock is what happens when you don’t sell enough of your inventory.
Why Is Inventory Management Important?
Inventory plays a crucial and challenging role in supply chains by helping to strike a balance between supply and demand. Businesses must address upstream supplier exchanges, and downstream customer demands to manage the supply chain flows appropriately. As a result, businesses must strike a delicate balance between meeting consumers’ expectations, which can be hard to predict with any degree of accuracy and keeping an appropriate amount of products and products in stock. A standard method for striking this equilibrium is through the coordinated dissemination of data in the service of enhanced stock management.
Benefits of Inventory Management
Controlling your stock levels has two key advantages: it guarantees you’ll be able to complete incoming or open orders, and it boosts your profitability. Managing stock involves also:
- Costs less
Knowing the direction of stock prices allows you to assess how much of anything you have and where it is stored. As a result, you can reduce the amount of stock kept at each location (store, warehouse) while still meeting customers’ demands, which helps you save money by reducing the time and resources spent on inventory management and the amount of goods that expire unused.
- Boosts Cash Flow
With efficient stock management, capital is invested in merchandise that has a high likelihood of being sold, keeping the company’s cash flow steady.
- Customer Satisfaction
Immediate fulfillment of consumer orders is a key to building loyal patronage.
Challenges of Inventory Management
More stock that can’t be moved, more products to meet demand, and a lack of visibility into stock levels and locations are the three most significant obstacles to effective inventory management. Some additional challenges include of:
- Accurate Stock Details
It’s only possible to tell when stock needs to be restocked or which products are popular with accurate stock data.
- Flawed Procedures
Using antiquated technology or time-consuming manual procedures might increase the likelihood of mistakes and slow overall productivity.
- Variation in Consumer Needs
Customers’ preferences and requirements are constantly evolving. How will you understand when and why their tastes shift without a trend-tracking system?
- Makes Effective Use of Warehouse Space
If similar products are hard to find, employees will needlessly spend time searching. The ability to efficiently control stock levels is key to overcoming this obstacle.
Inventory Management’s Primary Goals
Inventory management’s objectives can be broken down into two categories: operational and financial. The idea is to keep redundant listings and their expenses low while maintaining an inventory level sufficient to meet client demand.
1. Supply and Demand
Having all supplies on hand when the production department needs them is the primary objective of inventory management. In this approach, production will continue despite a lack of raw resources. Therefore, it is critical to always have a supply of everything needed to keep manufacturing running smoothly.
2. Maintaining Adequate Supply
All inputs and outputs, from raw materials to final goods, should be easily accessible. You need adequate repair supplies to fulfill orders from satisfied customers without having to skimp on quality. You’ll never be short on supply if you do an excellent job of anticipating what consumers want and finding reliable sources for those items.
3. Reduce Losses and Waste
Losses can be drastically cut down by careful inventory management. Without some check or record keeping, something could be wasted or lost. Having a record can help you save money by reducing unnecessary spending. Wastefulness in handling and storing goods and during production in the plant itself has to be minimized. Therefore, an inventory management system is a godsend for keeping tabs on stock and preventing waste.
4. Maximizing Product Profits
Analyzing sales trends is another priority for inventory management. The sales process is fundamental to the success of the business. It helps assess the existing state of things and extrapolate possible outcomes. Goods that need to be moving quickly enough can be spotted and removed. Products not moving off the shelves should lower prices to clear them out.
Ways to Streamline Inventory Management?
1. Pay Attention to Your Needs
Keeping track of a large amount of stock at a warehouse can be a complex undertaking. One strategy for dealing with this is to identify the most pressing needs and focus on them first. While certain items in your inventory may sell like hotcakes, others probably won’t. Keeping a steady supply of top sellers is a surefire method to keep your customers happy.
2. Engage With Suppliers
A stock-based business can only function with effective supplier relationship management. Building solid relationships with your suppliers are crucial for securing dependable product delivery, securing favorable pricing terms, and staying abreast of industry developments.
3. Build An Inventory Management System
Learning how your company handles order quantities, replenishment cycle times, safety stock, forecasts, and seasonality is crucial. Make changes to each procedure to better suit your company, and use an effective inventory management system to keep tabs on what works and what doesn’t. If you’re having trouble keeping track of your stock without going crazy, an inventory management system or software may be what you need.
4. Use Real-Time Data
Knowledge is powerful and valuable only if it is correct and up to date. Business efficiency and inventory management can benefit significantly from real-time data and analytics such as multilayer inventory tracking, forecasting data, automatic ordering, and individualized safety stock. To ensure you have the most up-to-date information at all times, it is recommended that you implement perpetual inventory management software.
No business wants to have to devote all of its time to stocktaking. This guide aims to teach you the fundamentals of inventory management and provide practical advice for streamlining this process. In this way, you may focus on running and expanding your business. Although it requires a lot of preparation, time, and energy to manage inventory effectively, it is a breeze when you have the right software. With I-Way, you can manage your stock in one unified system. Warehouse inventory management solutions give you access to your stock from any location. Our warehouse inventory management solution gives you total command. Get in touch with us to discuss how we can assist you with organizing your stock.