Inventory management is a component of the supply chain which supervises the flow of goods from the manufacturer to the warehouse. From there, these facilities are transported to the final buyer. Even trivial mishaps in this sequence can cause a lot of damage and the consequences may be too large to bear for a company.
In order to avoid such troubles, business strategies should be continually reassessed. To make this feat possible, it is important to thoroughly understand the kind of inventory at hand, the challenges it brings, and the need for better inventory management practices. This article will help realize the importance of inventory management in an organization.
Contents
1. Different types of businesses
1.1. Manufacturing businesses
1.2. Retailers and distributors
1.3. Services business
2. Challenges of stock management
2.1. Inaccurate forecasting
2.2. Poor data accessibility
2.3. Inability to meet compliance
3. Inventory management software to drive up profits
3.1. Allows access to real-time data:
3.2. Results in optimized utilization
3.3. Lower risks associated with overstock and outages
3.4. Greater room for stock diversification
4. Get the most out of your inventory management software
4.1. Track items across locations for constant updates
4.2. Streamline inventory check-ins and checkouts
4.3. Prevent outages with automated stock management
4.4. Record usage over time to forecast demand
1. Different types of businesses
For ease of management, inventory stock can be categorized into a few types depending on the industry of the firm. This division speeds up productivity by outlining the specialized needs of each kind of business. Once you know what your end product is, you can shortlist purchase orders for your stock.
Different businesses have different inventory needs
Here are inventory classifications according to various business industries:
1.1. Manufacturing business
If you are in the manufacturing and production business, then you deploy inventory to convert it into another form. Your customers could be both consumers or other businesses. This is what your inventory stock includes:
- Raw materials, such as automobile parts for a car company.
- Work in progress inventory, such as a semi-constructed building for a construction business.
- Finished goods, such as a laptop that has just been assembled.
1.2. Retail businesses and distributors
Such businesses don’t stock up raw materials or unfinished goods. Their main focus is to deliver completed products to their customers. Retail businesses include departmental stores that stock grocery items or shops that house various brands under one roof.
Distributors, on the other hand, buy inventory goods from the manufacturers and sell them to retailers. A distributor is often seen as the “middleman”.
1.3. Services business:
Not all firms sell finished goods. Some specialize in providing certain services to their customers. They still, however, require an inventory in order to assist these services. As an example, medical inventory helps medical staff in diagnosing and treating various ailments.
2. Challenges of stock management
Recent statistics show that the U.S industry loses a whopping $46 billion to inventory shrinkage. This usually results from the lack of robust logistics and supply chain management. Poor stock control policies have an adverse impact on business performance and lead to the following challenges for both small and medium-sized businesses:
2.1. Inaccurate forecasting
Most organizations treasure their insights and use them to predict future demand and develop strategies. If your insights are unreliable, your business is bound to take a hit. You’ll find excess inventory cluttering your warehouse or disgruntled customers receiving their deliveries late. Both scenarios translate to losses for your company.
Such malpractices can be tackled by investing in a tracking program for all your assets. Doing this allows you to tap into accurate real-time data which significantly streamlines procurement. When you’re able to monitor consumption trends in real-time, you are better equipped to reduce the chances of obsolete assets in your inventory and delays in order completion.
2.2. Poor data accessibility
Inventory management is not restricted to just one department. While the administration is responsible for taking orders and making purchases, the whole team should be updated on the current condition of the inventory.
Make all inventory updates accessible
Say, for instance, the inventory manager decides to switch to a cheaper vendor. But due to the absence of an employee management system, the news never reaches the admin officer. If this were to occur, the company would end up buying the wrong stock from the old vendor. Therefore, it is necessary to adopt a centralized inventory control program which can be accessed by everyone in the office.
2.3. Inability to meet compliance:
To maintain quality standards, all businesses are expected to follow a set of regulations laid down by governing bodies. Stock safety and inspection are carried out in line with these recommendations.
Companies should be wary of compliance rules as failure to meet them can result in heavy penalties and a marred reputation. That isn’t all- you also compromise the quality and safety of your inventory.
To avoid such a fate, conduct regular audit sessions to ensure that your inventory is meeting all relevant standards. Regulatory bodies tend to conduct unannounced surveillance of facilities so don’t slack off in this department.
3. Inventory management software to drive up profits
The best way to optimize your management processes is to invest in cloud-based software. By integrating software into your workflows, your company can rapidly generate higher sales and productivity to meet yearly objectives. The importance of inventory management in an organization can be realized by the following benefits:
3.1. Allows access to real-time data:
A robust management system allows you to track inventory utilization from procurement till the last stage of disposal. Such strict supervision gives access to real-time data for different phases of inventory consumption. A cloud-based system reduces the chances of human error and raises accuracy levels for greater efficiency.
3.2. Results in optimized utilization
The importance of inventory management in an organization can be further understood by the growing need for optimized utilization.
Well-planned strategies regulate resource allocation to cut down overhead costs. Optimizing usage helps make the most of the resources on hand whereas irresponsible usage leads to frequent breakdowns which require expensive large-scale repairs. Enjoy higher Return On Investment with better asset utilization!
3.3. Lowers risks associated with overstock and outages:
Excess stock ties up cash which companies could have utilized in a more profitable capacity. This loss of funds can easily surpass any wholesale stock advantages. Factors like changing consumer preferences, new trends, market fluctuations, all affect the demand curve so be prepared to deal with seasonal fluctuations.
With an inventory management system, you can order in advance and house only what you require.
3.4. Allows greater room for stock diversification:
With readily available data on all facets of inventory, you can make authentic business analytics possible. With this thorough insight, companies can run actionable reports to adjust stocks according to the current market demand. This way, the business remains prepared to tackle unforeseen challenges at all times.
Did you know? By 2018, only 17% of the organizations will function without mechanization to streamline supply chain processes.
4. Get the most out of your inventory management system
The importance of inventory management in an organization is vast. In order to maximize profits and grow, it is critical that companies work on their inventory management processes. The right software program in this regard will provide you with a variety of features to boost up inventory utilization.
Here are a few ways you can upgrade your company’s inventory portfolio for maximum returns in the long run:
4.1. Track items across locations for constant updates
One of the key factors concerning warehouse management is tracking inventory items. Whether you are a small or large-sized business, you have hundreds of goods coming in and going out for projects. The best way to maintain a robust system of check and balance is to implement positioning software for your company.
By doing this, you will be able to trace every movement of an item, every time it is checked out for use or maintenance. Such practices help attain data transparency and signify the importance of inventory management in an organization. Tracking lets you easily locate your inventory in large storage houses and create efficient workflow opportunities for your employees.
4.2. Streamline inventory check-ins and checkouts
The basic definition of inventory management also includes items in transit. For businesses on the go, maintaining records of frequently used items becomes tough. Oftentimes it happens that employees require a similar bundle of goods for projects in different locations. The most efficient way to handle such situations would be to create duplicate carts to enable seamless check-ins and checkouts.
Software programs designed to cater to your inventory needs let you do exactly this. Keeping in mind the importance of inventory management in an organization, this feature has added benefits for your employees as well. They no longer need to waste time preparing the same cart they used for a previous business conference. Effective time allocation motivates employees to manage tasks in a productive way! Reserve tools and machines as you work on the go
Read more: 5 Smart Tactics to Reduce Costs and Streamline Inventory Management
4.3. Prevent outages with automated stock management
For any business to optimize its stock, it’s better to understand what accounts as its stock first. Companies have diverse functions and for this reason, they tend to deploy a variety of goods and services. Stock refers to anything an organization uses to make a product or deliver a facility. Primarily, the stock can be classified into the following:
- Raw materials which can be readily used in production processes
- Unfinished goods undergoing the production process
- Finished goods ready to be bought or sold
- Consumables which can be used to aid the production process
Having a clear idea of the type of stock you require adds to the importance of inventory management in an organization. You can set minimum thresholds levels to alert you when the inventory is about to finish. After doing this, you will be able to generate automatic purchase orders for new stock. Making arrangements in advance helps prevent outages and overstocks and streamline work operations.
Did you know? The average accuracy threshold for retail work operations is only 63% in the U.S.
Read more: 6 Foolproof Ways to Use Inventory Control Software for Stock Optimization
4.4. Record usage over time to forecast demand
A wise business move is to maximize short-term returns while building long-term strategies for the future. This is possible when you record, store and analyze everything related to your business performance.
Present company performance and trends portray how your inventory will evolve over the next few years. Such phenomena highlight the importance of inventory management in an organization. Start doing this by tracking history for all your inventory items.
Having all the information related to item utilization over time gives you a fair idea of what changes you need to make in your current stock and inventory management practices. A comprehensive database enables strategic decision-making and inventory optimization for your firm.
Use tracking history to come up with improved business plans
Refine your inventory management practices with EZOfficeInventory
When it comes to increasing your ROI as well as upgrading your business techniques, one thing that does it all is inventory software. It serves as a single point of access for all your employees and isn’t just limited to purchase orders or vendor management.
In order to achieve an overall improved system of inventory management, your company should opt for EZOfficeInventory. As asset tracking software, it allows you to store all your inventory data in a secure system which is protected against malware and unauthorized use. This makes it easier for your company to withstand any infringement threats that might come your way.
Apart from being user-friendly, EZOfficeInventory has the capacity to scale up quickly as the business expands. No need to jump from software to software every time you acquire a couple of more assets or hire new employees.
Another exciting feature EZOfficeInventory offers is its flexibility to work with your existing software programs. No need to dispose of your current data to get in line with EZOfficeInventory. This software allows easy integrations wherever possible so that you can use whatever your employees are comfortable with. Linking a supercharged inventory management system to your company software only doubles the chances of a positive outcome.
EZOfficeInventory truly realizes the importance of inventory management in an organization and is always upgrading. Make the most of your inventory today and utilize it to get improved results!
Read more: EZOfficeInventory Named One of Capterra’s Most Popular Inventory Management Software
