Supply chain management has evolved over the years with the role of supply significantly increasing thanks to AI, automation, by-products, and data analytics. This is because the modern business world is becoming more digital and fast-paced thanks to technology. However, these benefits are only enjoyed by companies who embrace and adapt to digital transformations while incorporating them into their systems.
Currently, 57% of companies believe that supply chain management gives them a competitive edge that enables them to further develop their business. This is where inventory control comes in.
Inventory management solutions ensure retail business functions are accurate while inventory tracking keeps account of the lifecycle of the inventory as the stock comes in and out of the business. An inventory Management system is part of the Warehouse management system and it helps provide important details of the total amount of stock held in a specific storage location at a given point in time.
What is Inventory Management?
Inventory management is a step-by-step follow-up of the supply chain process which helps in tracking inventory and stock quantities as they move in and out of the business. The inventory management systems help you know where the inventory is at any given time and the quantities you have for easier inventory control.
Inventory management helps a business create an effective supply chain process that is updated. It helps avoid sly mistakes like mis-picks, mis-shipments, and overstock and out of stock among others. Such mistakes result in wastage of money and labor which negatively affects the business. In a broader context, it provides insights into financial standing, customer behaviors, and preferences, product and business opportunities, future trends, among other benefits. Think of it as a register that keeps track of the movement of stock and the innovation of inventory management trends.
Inventory Management Techniques
As an inventory manager, you should understand that inventory control and management is only effective when it is done correctly. This is why businesses invest their time and money in inventory management system like inventory management software. This will help you utilize proper techniques that give the most returns and guarantee better profits. Some of the inventory control techniques you can employ in your business include:
- Economic Order Quantity
- Minimum Order Quantity
- ABC Analysis
- Just-In-Time Inventory Management
- Safety Stock Inventory
- FIFO and LIFO
- Reorder Point Formula
- Batch Tracking
- Consignment Inventory
- Perpetual Inventory Management
- Lean Manufacturing
- Six Sigma
- Lean Six Sigma
- Demand Forecasting
- Bulk Shipments
How to Optimize your Inventory Management Systems
Whether you are a retailer or a manufacturer, keeping inventory is important. Inventory tracking and management help manufacturers reduce the total inventory amount and the time spent by products in the inventory. Generally, inventory tracking and management help you simplify the process of business operation and procedures.
On the other hand, retailers use inventory management to match demand while keeping tabs on the stocks. it helps you understand what you have, how much is being sold and what do you need. This helps in finding ways to improve the flow of inputs and outputs and adapting a fine balance of the flow of the stock.
The various ways organizations can use to optimize inventory management system include:
Understand Your Demand
Understanding the demands of your brand helps you establish accurate forecasts of the product flow. This helps in maintaining levels of input that satisfy market demand. Organizations should invest in inventory management solutions that help in setting up advanced forecasting models that can be trusted for accurate demand forecasts.
Analysis of previous business activities is not enough if you are not considering:
- Product Lifecycles
- Qualitative Factors
Understand Your Products
As an entrepreneur, it is important to invest in an inventory control tech that helps in segmenting the stock based on their value. The best technique is the ABC analysis. Sales revenue, profitability, sales volume, or annual consumption value are some of the top segments that can be used to define the value of the product.
After you have chosen the segmentation that works for you, split the stock into categories and label them A, B, and C in order of their value C holding the least value.
The ABC analysis helps you identify the products that you need to focus most of your efforts and money on while setting more effective stock control parameters. Alternatively, you can invest in an effective inventory management software with multi-dimensional item categorization.
Establish Stock Level Control Policies
Establishing a set of rules that ensures you are stocking the right goods, at the right time in the right quantities is a necessity in effective inventory management. While an inventory segmentation like ABC analysis is effective, establishing parameters that recognize different service levels, safety stock levels, and reordering processes are essential.
Hacking this the right way is setting useful inventory KPIs that add value to your organization when it comes to meeting the objectives and improving efficiency, customer service, and profitability.
Initiate Service Level Targets
A target service level is used to measure the probability of stocking the right product which leads to complete and fulfilled orders. Service level targets should be subjected to the expectations of the customer and the time of delivery.
At the same time, it is noteworthy to know that the provision of higher service levels that its necessary leads to increased required costs. However, failure to meet customer expectations results in a loss in sales and a bad brand reputation.
Because service levels influence stock turnover, organizations should initiate higher service levels on faster moving items while lowering them for those with demand. This is a trick to keeping turnover rates high while avoiding unnecessary costs.
Implement Automated Inventory System
While most of the processes have gone digital, it only makes sense that organizations gravitate from manual inventory management to automated processes. An inventory manager should use inventory management software that allows the automatic addition, editing, and transfer of inventories in real-time.
With automated inventory systems, organizations can manage certain business parameters while the management and accounting software takes care of the rest. This includes pulling inventory counts from suppliers using the data feed that automatically feeds on the website of the organization.
To be honest, manual processes, standard ERP functions of the system, and databases are not reliable in the efficiency and effectiveness of stock operation and management. It is a competitive world and that is why many businesses and companies are turning to digital transformations to keep up with modernized technology.
To better optimize an effective inventory management system, suppliers and organizations must be willing to closely understand their customers and the product. Focus on the demands of your target market audience then create a stock that meets those demands. This will help in adapting to inventory management solutions that have a positive impact on the business.