Inventory management plays a significant role in business. However, many organizations do not implement good management practices when it concerns inventory. This has an adverse impact on their bottom line. It is therefore important to choose the right technique and process for inventory control. It establishes accuracy and control over the inventory.
What is Inventory Management?
Inventory management is the systematic approach of storing, ordering and using the inventory. It incorporates the management of raw materials and finished products.
The inventory covers the important assets of an enterprise. A shortage of inventory will definitely affect business, especially in a peak production season when manufacturing lines are working continuously.
In business, it is crucial to maintain the right level of stock at the required location. Inventory management is not only important in terms of maintaining the right stock but to prevent overstocking.
It is necessary to know when and how much to reorder, which warehouse location needs the reorder, and such other issues. In such situations, things can get chaotic if the required stocks are not available. In order to avoid them, an organization needs inventory management.
Hence, there are certain inventory management tips that can be useful for the organization.
1. Eliminate Pen Paper Method
When no technologies were available, methods such as paper documentation were used. This was the traditional way of inventory tracking. The interesting thing is many businesses still use it.
A large or medium-sized organization has inventories in great volumes. As such, it is hard to keep records of each and every inventory with a pen-paper approach.
The data collected with this approach can be inaccurate and also lead to wrong business decisions. Moreover, employees spend more time searching for inventory information. This results in decreased productivity and wastage of manpower.
2. Invest in Inventory Management Software
Inventory management software can be really helpful, especially for restaurants and hospitals. For instance, a hospital or medical store can keep precise and updated stock records, particularly for pharmaceuticals and surgical equipment. This is one of the most significant jobs for any hospital healthcare organization.
As pharmaceuticals and surgical equipment are the most utilized items in a hospital, it is important to keep up a reasonable load of medicine stocks. They also should have vaccines and consumable products used in surgeries such as masks, syringes, gloves etc.
Medicines and surgical equipment are expensive items. It is therefore critical for healthcare entities to keep track of their stocks. The sheer investment on them is a sufficient reason to keep track via inventory management software.
3. Real Time Inventory Tracking
Inventory is considered as one of the most valuable items in a restaurant business. After all, the business depends on it. Hence, managing and keeping track of the inventory is a big responsibility.
This is where inventory tracking software comes into play. Through the software, the user remains updated about the inventory level (Low, Moderate, or High).
When the inventory is low, the system notifies the user every time when the count reaches the minimum defined level. It also notifies the person responsible for managing the inventory for that particular item. The user can thus define the reorder level of inventories for each and every item separately.
4. Categorize Inventory
Inventory can be categorized according to the priority. Some people also refer to it as ABC analysis. According to Lokad, “ABC analysis is an inventory categorization method used as a crude prioritization mechanism to concentrate efforts and resources on the items that matter the most for the company.
This method is grounded in the empirical observation that a small fraction of the items or SKUs typically account for a large portion of the business.”
ABC analysis is based on the concept of the term known as "The Pareto Principle".
One of the major benefits is that you are able to avoid the dead-stock situation. In dead-stock, items cannot be sold any longer due to whatever reason such as the product is out of fashion and has become irrelevant.
5. Use Cloud-based Inventory Management
This practice can change the whole working scenario of business. Though a cloud-based system is not installed on your local system, you are able to use all its features. Most importantly, you can access the data from anywhere across the world.
It can assist you in running the operations smoothly without causing any problems. Moreover, there is a support team in case any assistance is required for any issue in the cloud-based app.
The system can be accessed from anywhere as it is hosted on the Cloud. It can provide tremendous advantages to your business firm.
6. Conduct Audit Regularly
Gone are the days when the auditing was a long-drawn, time-consuming procedure. A business organization owns thousands of assets and inventories items. Auditing is very crucial for identifying and verifying what assets and inventory items are present in the organization.
At times, a user faces questions like, how many assets are on lease, where they are located etc. Auditing provides answers to all such questions. It provides the actual stock of inventories with their current condition as well.
As an audit needs to be performed on a regular basis, any issues can be found out quickly and corrective action executed.
Auditing also plays an important role in calculating taxation. With depreciation, the correct tax computation can be done. With the software, the user can perform an instant audit process.
Inventory management is an operational necessity. There are several businesses that end up overstocking. Such practice can spell several disadvantages e.g. more space is occupied, stock may reach expiry date before use, money has been spent on stock more than what was necessary.
Hence, the best practice is to maintain stocks at the optimum level. Inventory management software assists in managing stock levels very efficiently and proves to be beneficial to the business.
In today's competitive world of business, inventory management gives you that extra edge. Besides, it is indispensable for business growth.