Inventory Management Benefits
By Debbie Gregory.
VAMBOA hopes you have enjoyed the previous five articles in this series. Inventory Management is the final article and here we go.
Inventory management varies from store to store, company to company and industry to industry. However, the basic principles remain the same across the board. Inventory management ensures that you have the correct products in the quantities that you believe you will need. It is one part of the overall supply chain management that means that you know what you have, what you need to order, and how long it will take you go obtain more once you place your order.
Proper inventory management answers important questions, such as:
- What items do I have?
- How many of a specific item do I have?
- When do I expect to run out of a specific item?
- When do I typically run out of this item?
- How many will I need to reorder?
- How much stock does the supplier have of this item?
- How long will it take for the supplier to refill their stock of this item?
How do you keep track?
There are several ways you can track your inventory. The most basic would be a simple spreadsheet where you log items in and out as you ship/sell and receive them. Another method would be to use dedicated inventory software on a computer and we have covered in the prior articles a number of viable options. Larger companies or suppliers use electronic data interchange (EDI) systems that plug directly into their enterprise resource planning (ERP) system.
What are the benefits of good Inventory management?
Real-time Inventory Tracking:
Instead of taking the time to constantly count how many items you have in stock, an inventory management system enables you to keep track of all your inventory. You can call up any item in your inventory and check its status in moments, at any time. This saves you both time and money.
Prevents Unnecessary Ordering:
If you know how many of an item you have, you are much less likely to accidentally order too many of any one item. You do not need to rely on any possible miscommunication or recent sales that you are not yet aware of as inventory is updated in real-time.
Reductions in Cost:
Over-ordering is not simply a storage problem; it also ties up your cash reserves and can lead to loss or spoilage of product (depending on your industry). A good inventory management system enables you to be aware of exactly how much you have of something and when you will run out of it so you can avoid accidental over-ordering or waste.
Better Overall Organization:
Good inventory management helps you organize your stock or raw materials. You will clearly be able to see which items sell fast, which do not sell well, what times of the year certain items sell better than others, and more.
Better Forecasting:
If you can easily track how often products sell out, you will be able to avoid empty shelves because you will know when you need to order more before you completely run out of any product(s). Automated systems can be set up to send alerts to trigger automatic reordering of items once they reach a certain level. Inventory management systems also allow you to store and access past data so you can better forecast future sales and performance.
Improved Sales:
Utilizing a good inventory management system allows you to see when you are selling more of any items which provides you the opportunity to better promote those items to customers. It also allows you to determine which products are under performing so that you can eliminate items from your offerings that are not selling.
As you can see regardless of the size of your business or whether you are a retailer, supplier, vendor, or manufacturer, you need to be practicing solid inventory management techniques in order to always have a clear picture of what you have on hand.
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