Why do companies hold a variety of inventory items?
According to a simple economic principle of profit functions, firms have a fixed amount of inputs in the short run. However, in the long run, they can adjust their levels of outputs through an increase or decrease in the input quantities. This theory depends extensively on the company’s ability to accurately predict future trends in the market. Say, for example, you are a smartphone company and you expect an increase in your buyers in the coming months. The best response would be to deploy more resources next time so that you can increase the production of smartphones. This series of actions follows from economic intuition. But, is this as easy as it sounds?
Long run forecasts are only possible when a firm has resources to cater to unexpected changes. One way to deal with sudden transformations in the market is to have access to extra resources at all times. This is mainly why organizations hold multiple types of inventory, as a precautionary method. The five main types of inventories businesses invest in, are:
1. Cycle Inventory: When a stock is bought in bulk, your company has a higher chance of taking advantage of economies of scale. So, in order to increase productivity while saving costs, companies order more stock that is needed at the present time period.
2. MRO Inventory: MRO stands for maintenance, repair, and operations inventory. Business assets have a useful life and depreciate with time. They often break down and need repair and maintenance as well. The best way to gear up for such situations is to have the necessary inventory to fix broken equipment. MRO inventory is used to facilitate the working of all valuable assets.
3. Transit Inventory: For businesses on the move, it is quite common to ship off inventory across different locations. This is labeled as transit inventory.
4. Perishable Inventory: Not all tools you acquire last you in the long run. Some items have a fixed lifespan and tend to get expired or used up quickly. These items are known as perishable inventory and require timely consumption and maintenance.
5. Buffer Inventory: When you fail to plan out your usage patterns accurately, you are likely to suffer from shortages. To avoid such unpleasant situations, companies tend to hold buffer stock. This is basically ‘just in case’ stock if you run out of things.
How can your company monitor every type of inventory through a single software?
After going over the different types of inventory, the next task is to devise management strategies for effective stock utilization. For optimized work operations, your company should invest in an inventory control software. Doing this not only helps you supervise multiple items at once but also maximizes returns on investment. The most common inventory challenge faced by companies is misplacement and theft of items [Source]. This can be a serious issue if you fail to account for lost tools and equipment, especially near the audit season.
If you are a business which holds more than one type of inventory, it is utterly important that you track them in the best way possible. You can easily do this with an inventory control software that can be molded for your business. An inventory tracking tool enables you to create barcode labels which can be scanned into the system against all the check-ins and checkouts. Regulatory practices such as this, help lower the risk of internal fraud and make your inventory last longer.
When it comes to transit inventory, many organizations struggle to keep a track of locations. Equipment movements outside the office are difficult to manage if you rely on manual documentation. However, if you were to install a cloud-based inventory control software, you will be done with this task in no time!
Automated entries through barcode scans allow you to enter locations for different types of items in your inventory. This feature allows you to record all movements seamlessly through a single software. You can update inventory locations when your stock reaches its desired destination. Instant data retrieval and inputs increase workflow efficiency and productivity!
From the types of inventories discussed, perishable inventory calls for special care and attention, when it comes to expiration dates. While it is important to stock up enough quantity, you shouldn’t overstock on items as well. In the case of perishable inventory, an extra stock will lead to unnecessary wastage once the expiry date has passed. This problem can be sorted out with a simple solution; automated purchase orders!
Inventory control software lets you manage your perishable stock in an organized manner. You can set minimum thresholds. By doing this, you will have a new inventory before you run out of existing total stock! Features such as this, enable you to fully utilize your inventory to generate the best results.
Inventory control software – the key to improved business performance
It is common to see companies allocating huge budgets for their resources, but having difficulties in managing them. While it always helps to have good quality tools, it is up to the business to make sure they stay that way. This is where inventory tracking and control software comes in. With supercharged tracking features and stock optimizing abilities, the software lets you achieve your business goals and objectives faster.
No matter how many types of inventory items your business possesses, the software lets you monitor them all through a single access system. Not only this, you can also create customized reports at the end of each business year to see how well your inventory has progressed. Creative analysis of current resource utilization is important when it comes to forecasting for the long run.
Implement inventory control software for efficient and streamlined business management processes. If you take care of your inventory then it’s bound to have a positive impact on your profit function as well!
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