What is inventory management?
Inventory management is the process of planning and controlling the flow of goods or merchandise in a company. It is the way in which an organization and its departments determine what items are needed and what items are required to be sold in order to generate profit. Most companies have some form of inventory management as part of their daily operations. It is a big part of managing a business, especially in retail and wholesale companies. Inventory management can also include evaluating items that are not sold so they don't get wasted or stolen. This means that there are many different methods that can be used to manage inventory from accounting methods to physical methods. In this article, we will discuss how inventory management can help your company maintain control over its supply chain, and what these different methods entail.
Effective Inventory Management- The Top 5 Ways To Boost Your Business
What is inventory management?
Inventory management is the process of tracking and managing the stock of a company's products. It helps in keeping track of all products that are in an organization's possession, whether it be in a warehouse or a retail store. This includes counting inventory and performing financial management processes such as invoicing, calculating the amount of profit generated from goods sold, and determining how much stock needs to be ordered for future sales. The inventory management process is essential for any business that sells products at some point during its lifecycle. It ensures that there is enough stock in order to meet customer demand and keep the business operational. However, with the high volume of products being sold these days, this process can become complicated due to the increased amounts of data involved. Inventory management software can help streamline this process by automating and simplifying various processes such as ordering, receiving goods, stocking shelves, tracking goods through each stage of the supply chain, and more.
How does inventory management work?
Inventory management is the process of identifying and tracking the items that are available to sell and then purchasing or manufacturing those items. It may also include managing inventories by selecting the desired quantities of items to produce. Inventory management is used to keep track of the number of items sold in a day. It can help you avoid stock-outs, mark irregular sales and restock your shelves from the company's warehouse. Inventory management may be done on a per-store or per-line basis. It includes systems to manage inventory levels in order to meet customer demand and keep costs low while maintaining the desired cash flow. There are many types of inventory management including methods used in retail, wholesale, manufacturing, distribution, and health care industries. Here are some industry terms that will help you understand how this service works for your business.
Data Warehouse- The main purpose of this system is to store all the company's data for quick retrieval at any point in time.
Warehouse Management System (WMS)- This system enables logistics personnel to use machine vision technology to automate the picking and packing process, which improves efficiency and maintains stock levels.
Outsourced Inventory Management- This method often involves third-party suppliers who manage inventory processes for your company.
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Why is inventory management important?
Inventory management is important because it is a key component of the supply chain. Without this, the flow of goods will not be able to continue and business will suffer. If you are a business owner or an executive who oversees the operations of your company, it's up to you to ensure your company's inventory management system is in place. If done right, inventory management can help avoid stock-outs, dead stock and keep costs low while delivering products at the right time. To deliver on these goals, it's essential that companies select the right software system for their needs. That's why it's important to understand what inventory management is and how it aids in your business. Inventory management is more than just controlling the number of products on hand. It also includes pointers for customer satisfaction, demand forecasting, and several other management techniques so that you can get ahead of the game.
In many cases, businesses use web-based software systems like software or Enterprise Resource Planning (ERP) systems. The challenge is finding a system that allows for quick implementation without sacrificing customer experience or convenience of use. Here are some types of inventory management that will help you choose the right fit for your company.
What are the various types of inventory management?
Inventory management is the process of tracking, maintaining, and controlling stock levels. It includes purchasing, storage, and distribution of goods. Every business needs to put an efficient management process in place to maintain the required stock quantity. The need for managing inventory has been increasing as businesses try to get more from their investments by reducing overstocking, waste, and loss. Inventory management is a basic business function that a company must have to run smoothly. Largely, types of inventory can be grouped into four categories raw materials, work-in-progress (WIP), maintenance, repair and operations (MRO) goods, and finished goods. Let's discuss the four types of inventory management in greater detail.
Raw materials- These are items required to furnish finished products and can be produced by your business or procured from a supplier. For example, a cafe will procure coffee beans from a coffee producer.
Work-in-progress (WIP)- These are products that are in the process of moving through production and are not ready to be sold. For a baker, this might be a product that is in the oven and not ready for sale.
Maintenance, repair, and operations (MRO) goods- These are items that support the production of finished goods and are a part of the production process but may not be a direct or prominent part of the finished product. A baking tray, in the case of the last example, would be an MRO type of inventory.
Finished goods- As the term suggests, these are items that have been through the production process and are ready to hit the market for sale. For example, a cup of coffee or a croissant.
Key features of effective inventory management?
Inventory management is one of the most important parts of running a successful business. Without an effective inventory management process, it is difficult to determine your safety stock or even your total inventory value. Below we will discuss the key features of effective inventory management systems-
Accurate Cycle Counts- Inventory control tools categorize products by type, location, and SKU/ serial number, generate data and reports in real-time to offer insights about the items at the warehouse. Without accurate inventory counts, it is impossible to know what inventory you have and what you need. You could end up with too much or too little stock which can lead to out-of-stock items or overstocking which can cause excess costs. This also helps with supply chain management.
Inventory Tracking- In order to control your inventory, you need to be able to track the status of your stock at every step of the supply chain. Perpetual inventory tracking tools can help automate the manual process. For instance, the system will automatically generate a tracking number when a receipt or invoice is created. Further, keeping track of third party logistics providers with emails can help you better manage customers by accurately divulging stock or shipping-related information.
Inventory Barcoding- An efficient barcoding software will automate inventory operations and eliminate data entry errors, especially at the point sale stage. Automating the collection and organization of inventory data through barcoding quickens the process while ensuring accuracy.
Efficient Order Management- An efficient ordering process makes sure that a purchase order is raised when goods are needed and not before that, meaning that your company won't be wasting money on unnecessary item purchases. In-built inventory alerts or reorder points features that alert you about low inventory levels and shipment or supply chain delays help reduce waste and optimize inventory financials while delivering customer satisfaction. These alerts can give you greater control over your inventory with sales forecasts, shipping logistics, and supplier management.
Inventory Optimization- A good inventory system should not only allow you control over your inventory but offer you the tools required to optimize it. Eschew a free trial or basic order process for a more sophisticated plan with features like automated reports, inventory trends, digital sales data, and an overview of the entire supply chain that allow you to optimize your on-hand inventory. Another technique that can be adopted is economic order quantity to make better business decisions. Economic order quantity refers to the optimal amount of inventory a business needs to meet its demand while minimizing storage or carrying costs.
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Top 5 ways to boost your business with inventory management
Inventory managementis a vital aspect of any business. However, many businesses don't have a proper inventory management system in place. Inventory management helps you track your company's stock, identify trends, and find the optimal point of sale. It also empowers you to make informed decisions when it comes to product procurement and pricing. Here are the top 5 ways that stock management can help boost your business.
1. Track all information related to the product
For convenience and to avoid any confusion, it is important to track all information related to a product. This is especially true when you need an overview of the entire process, such as project management software. Every day, more and more companies are moving towards digital products and processes to improve their efficiency and effectiveness. These tools can be used by everyone from a small business, mid-range online stores, or owner to a corporate CEO. They can be used for specific tasks or as the foundation of a company-wide initiative. Regardless of how you use them, it's important that they work correctly the first time around. While there are many different applications that offer this functionality, Zipinventory offers features that make it better than others at keeping track of your data and processes.
2. Always audit your inventory
Businesses are changing constantly. From new markets to new products, there's always something new to try out. But what happens when your current inventory is outdated? If you're not quality checking and updating your inventory regularly, then you're wasting time and money on outdated supplies that won't sell well. Even with a good, cloud based inventory management software, you will have to physically keep track of your inventory to make sure your stock matches what you believe you have. There are several management techniques that can be employed to achieve this goal such as periodic inventory or an annual physical inventory count of every item in your stock and spot-checking.
3. Practice the 80/20 inventory rule
You're probably a big fan of the 80/20 rule or the Pareto Principle. The management principle states that 80% of your results will come from 20% of the efforts. In other words, you're likely to get more bang for your buck when you put less effort into something. It is easy to achieve this with what is known as ABC analysis, which distinguishes the most profitable items of your inventory from the least profitable ones and places them in an economic order of decreasing value. So, category A will comprise your most profitable items while category C will have items that are of the least value to the company. Consequently, everything else will fall under category B. An inventory management software can help you identify the top 20% of your inventory which is the most profitable so you never run out of stock! But if a company knows its most profitable items, why should it worry about category B and C items at all? Identifying low-value products that sell quickly allows businesses to keep them in greater proportions in the inventory while giving you a clear picture of slow-moving items so that they can be discontinued. Practicing the 80/20 rule can significantly enhance your company's inventory system.
4. Track sales
Accurate sales forecasting is vital for any business. Projected sales calculations are one of the many Zipinventory Features that can help you determine average stock, what is required, what needs to be ordered, and when. Either the perpetual inventory or periodic inventory method can be used to track inventory. The projected sales calculations should be based on historical sales figures, demand forecasts, and marketing strategies, among others. Using point of sale and tracking tools can seem like an added expense but will go a long way in ensuring that you have what your customers need in stock.
5. Invest in inventory management technology
Logistical management is one of the most important things to consider when running a business. It can be difficult for businesses to invest in inventory management technology as it's often perceived to be an unnecessary expense. But investing in inventory management software can help you save money and increase your productivity, which is why it's a smart business decision. One way you can start implementing inventory management technology into your business is through a subscription service. Many inventory software allows users to start free to try out its features. If you own or manage multiple locations, management software will enable you to check inventory levels across your stores. Another benefit of using this type of service is that it'll reduce the time required for managing stock, as well as provide an accurate forecast on future product sales. If you're looking for more ways to optimize your business, consider an inventory management software that can benefit your company.