Nearly any facility needs to adopt an inventory management system. These systems allow goods to be tracked throughout your facility’s supply chain in a way that optimizes the whole process, from order placement to customer delivery; they map the entire journey of a product. Companies need to understand what they have in stock at all times in order to efficiently perform required duties.
Essentially, inventory management is the optimal organization of your stock. It’s a systematic approach to obtaining, storing, and profiting from your company’s raw materials and finished goods. The key to success is having the right amount of inventory in the right place, at the right time, and at the right cost. You’ll streamline the ability to satisfy customer’s needs while avoiding unnecessary costs and risks. Aspects include overseeing and controlling purchases from both suppliers and customers, maintaining storage, controlling the amount of product available for sale, and fulfilling orders.
The importance of inventory management cannot be understated. For a business to run successfully, you must understand what materials/goods you have on hand, where they are, and how they’re arriving and leaving. A clear, high-quality inventory management system can help you:
- Reduce costs
- Provide better customer service
- Optimize fulfillment
- Prevent financial loss from returns, spoilage, and overstocking
There are several different techniques available to conduct inventory management, and which system you adopt specifically will depend on the nature of your operations and services. Common techniques include:
- ABC analysis methodology. This separates inventory into three categories which may be managed separately. It provides enhanced control over goods of high value, but requires a large amount of resources.
- Category A represents goods of low quantity and high value
- Category B represents goods of moderate quantity and moderate value
- Category C represents goods of high quantity and low value
- Just-in-time (JIT) methodology, which is also known as a Kanban system. Kanban is designed to produce the exact amount of a product that’s needed at the exact time it’s in demand. This enables you to develop inventory that’s smartly stocked, and it eliminates the need to halt production or store excessive inventory. It also prevents any down time between the steps of the production process.
- A perpetual inventory system is a great way to manage inventory. This system updates inventory information in near-real time and can be done using software or manually with pen and paper. Benefits include precise restocking, reduced risk of theft, more accurate financial information, and easier regulatory compliance.
Inventory management definitely streamlines inventory and boosts the success of your facility. However, knowing where to store your stock, how much to order, when to order, etc. quickly becomes complicated. Due to this, many businesses adopt software or an app to aid their inventory management.
Any app or software you invest in should offer the following features for effective inventory management:
- Inventory optimization
- Barcode scanning
- Notifications and alerts for stock
- Generation of reports
- Management from multiple locations
- Stock returns handling
- Records of purchase orders
- Predefined categories for group inventory
Similar Glossary Terms
- Inventory Control
- Perpetual Inventory
- SCM (Supply Chain Management)
- Asset Management
- Fleet Management
- Process Safety Management (PSM)
- Total Quality Management (TQM)
- Visual Management
- Earned Value Management (EVM)