It does not matter what is the nature of your business type, inventory is essential for every business. Inventory is one of the most crucial parts of the business. Thus, inventory management is essential for business for effective business. There are several businesses such as retail, manufacturing in which inventory management and its techniques takes a significant part.
What Is Inventory Management? Why It Is Important?
Inventory management is the process of keeping track of stock. It also tracks where stock is located. Other than this inventory price, quantity & weight is also tracked.
It is a systematic approach to storing and selling inventory. Inventory management tracks the lifecycle of inventory as it comes into the warehouse and goes out of the warehouse. It also helps in managing stock levels in an efficient way.
Inventory can be the raw material that is utilized in manufacturing a complete product and inventory itself can be a complete product (finished good) ready to consume or ready to be sell.
Several organizations utilize barcode, QR code (quick response code) for better accuracy & proper counting of stock. Inventory management is important because it keeps inventory organized and takes care of the supply chain.
Inventory management saves from overstocking or understocking issues. Overstocking or understocking issues are the result of manual management and they are the result of human error.
These problems will cost you a lot. Inventory can be expensive and can impact the bottom-line of the organization. To avoid these issues inventory management software utilized.
What Is Inventory Management Software and What Are Its Benefits?
Inventory management software is an application that tracks the stock in an automated way. Within the software, you can create and maintain a complete list of inventories including spare parts and consumables.
You can add or move inventory from one location to another location, this comes in handy when you have a lot of inventory in one place and another place is lacking stock.
It eliminates the usage of pen and paper methods for inventory tracking. It removes the errors drastically as all the work is done via an automated way. As we know the manual process is prone to error.
Manual inventory management is a very hectic & complex job because there are lots of factors that need to be accounted for proper inventory management. Inventory management software provides alerts and notifications when inventory is below a defined level. It also allows you to set the re-order limit. Makes work a lot simple.
Moreover, it uses the barcode, QR Code (Quick Response code), RFID (Radio-frequency identification) for tracking inventory.
Inventory management software benefits are as follow:
- Better Stock management
- Set re-order limit
- Alert & Notification
- Detail Inventory report
- Increasing customer satisfaction
- Eliminating manual work
- Increasing productivity
What Are the Important Inventory Management Techniques to Control Inventory?
Important Inventory Management Techniques to Control Inventory are discussed below:
1. FIFO (First in First Out)
As the names suggest the product which comes in first gets sold first. It is an important principle of effective inventory management.
This is particularly significant for perishable items so you don't wind up with unsellable deterioration.
It's additionally a smart thought to utilize the FIFO technique for non-perishable items.
If the new inventory will be kept behind, they are bound to get exhausted. Also, their packaging design regularly changes over the long run. You would prefer not to wind up with something out of date that you can't sell.
To deal with a FIFO framework, you'll need a coordinated & organized stockroom. This ordinarily implies adding new items from the back, or ensuring the old item remains at the front.
2. JIT (Just-In-Time)
In this technique, the raw material is ordered when production is scheduled or as per the customer's demand and requirement. It avoids unnecessary storage of raw-material. Overall, it reduces inventory costs and increases profit.
Just in time technique is also known as the Toyota production system because it is developed by Toyota manufacturing company in Japan. Just in time saves the space of the company. It also saves from wastage of inventory as we know inventory can be wasted because they also have an expiry date or it can be damaged. Justi n time strategy is cost-efficient. This technique can be used by small scale organizations.
3. ABC Analysis
ABC stands for always better control. In the ABC analysis technique, inventory is categorized into 3 categories A, B, and C. A category inventory consist which is expensive in price and less in quantity. In the B category inventory is included which is less costly and more in quantity & in the C category inventory is economical and quantity in large numbers.
A category is very critical and they properly need to be taken care of otherwise it can impact the bottom line! They have low frequency in sales but generates more profit. It is similar to the 80/20 rule.
Dropshipping is right around an ideal situation from a stock management viewpoint. Rather than conveying stock and boat items yourself - regardless of whether you are doing by your end or third-party logistics. The manufacturer or distributor deals with it for you. Fundamentally, you eliminate stock administration from your business.
Regardless of whether you simply need to utilize outsourcing to test new arrival stock before putting supplies into a major request, it is inclined to be an extraordinary extension to your business. Dropshipping is an effective technique used by online merchants, it saves them lots of time.
Always remember that a compelling inventory and asset management software can assist you in diminish costs, keep your business beneficial, predict sales peak time & how sales can be increased!
It prepares the business for unforeseen. With appropriate inventory management techniques or stock management system, a business has an improved possibility for growth, profit, and endurance.
It's an ideal opportunity to take complete responsibility for your stock administration and start saving money. Overall, inventory management software is helpful in the effective management of inventory. It can save you a lot of money.
Frequently Asked Questions (FAQs)
1. What is the 80/20 rule?
80/20 rule says that 80 percent of the outcome comes from 20 percent input. It makes the organization more productive.
2. What is an example of an inventory?
In business, inventory can be any items, goods, products. It is used for selling to make profits. Inventory can be categorized as per the business nature. For example, a vehicle manufacturer vehicle can be inventory but for a newspaper vendor, a vehicle is an asset and a newspaper will be inventory.
3. What are the benefits of inventory management?
The benefits of inventory management are saving unnecessary expenses over inventory and, reduce overselling risk, avoid stock issues, better inventory visibility.