Inventory management refers to the process of holding idle stock that has economic value, either in its complete or incomplete state, as it waits to be processed into a product, packaged, or sold at a future point in time.
All organizations that engage in the production or sale of products hold inventory. Inventory management enables your organization to supply products to your clients on time and not run out, without incurring the high costs implicated when holding stock. Food products are kept fresh. Chances of expiry and overstocking your shelves or warehouse are reduced.
Holding inventory makes it possible to quickly facilitate the next stage of a production process or sales. The table below shows the different types of inventory.
It is difficult to manage significant quantities of stock without inventory management software. This is the computer-based inventory management system that helps track inventory levels through the three different stages from production to when the goods have been purchased.
In manufacturing a good inventory management system will create Barcode labels, Shop orders, Packing lists for containers, Work orders, Bills of materials, Order management, and others. The key components of a good inventory management system are:
i) Order management: the inventory management software can aid in producing work bills when an order is put into the system and help with the tracing of the order until it gets to the client.
ii) Asset tracking: you know where each batch of produced goods is at.
iii) Service management: one can extract reports and other relevant information needed to support customers.
iv) Product identification: barcoding and labeling
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v) Inventory optimization: having the right amount of inventory at any time.
While a small business can often manage their inventory manually, it will be difficult to grow your business efficiently without good inventory management software. The following are some reasons why you should consider installing a management software right from the onset.
i) Cost savings: as there is no product overstock. the products and raw materials kept by the company can be at a minimum required and a reorder point worked into the system.
ii) Data security: staff can access the information they need without compromising security. This is done with a limitation of user rights.
iii) No product outages: this minimizes lost sales as there is enough stock for new orders.
iv) Increased efficiency: if the different aspects of inventory management were to be done manually it would take a lot of time and the calculations would be susceptible to human error. An inventory management system can handle complex calculations fast. You are able to get: reorder point, Order quantity, Lead demand, Stock cover, and reasonable accuracy of the forecasts.
v) Insight into trends: You will be able to get insight into the performance of different products, where they are from, how long it takes from purchase – production – sell, and in what volumes they sell during different seasons.
vi) Warehouse organization: moving products is better facilitated with an inventory management system – products that move fast can be grouped together and organized near the exits in the warehouse to facilitate removal and loading. Products that are commonly shipped to the same stores can also be grouped together.
Inventory management systems can be expensive. You can also have a major problem if your system goes down or there is a problem with your hardware. Cloud-based systems address these issues. We look at these in the next post.
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