Inventory Management Concepts You Need to Know
Inventory management is the entire process of managing, well, a company’s inventories. It entails the process of ordering, buying, using, storing, and then selling inventories. It also involves the management of raw materials and their components, warehousing, finished products, and processing. The main aim of inventory management is to prevent loss from spoilage, shifts in demand, damage, or theft. Without inventory management, a business, small or large can lose billions of dollars a year from any of the aforementioned ways.
The following concepts come into play during inventory management and help to understand how to manage your inventory from start to finish.
8 Concepts in Inventory Management You Must Know
This refers to how you order merchandise from a supplier. Although this can sound like a simple task, it defines the method, quantity, and quality of what you order. You might also need to consider space and financial limitations for smaller businesses. When ordering a product, ensure that you know what you need. Research the different brands, prices, and types of machinery. Compare suppliers also to know the best vendor to order from.
This is another concept businesses need to be aware of during inventory management. Keeping records of the product information helps to prepare for things like changes in cost, scarcity, and seasonality. To track product information, get an inventory book and record all items, the suppliers, countries of origin, SKUs, barcode data, price, and so on. Also, note down the changes and other information you might need.
Receiving a shipment
This is an important part of inventory management because, at this point, there can either be a huge loss or gain. While receiving the shipment, carefully inspect the items before anything is finalized in case of damaged goods, missing items, and so on. Compare the products to the packing slip and count them also. If there is any variation for whatever reason, document the variation and make it known to the shipping company and supplier immediately.
After you have received the pieces of machinery, the next thing you need to do is think about the best method for storing the inventory. There are different options for this including a distribution facility, a local warehouse, or a garage. However, make sure that the storage facility is not so distant from where it will be used so that you can minimize the risk of destruction and loss on transit.
A comprehensive count as often as you will help you better know what you have, the state it is at, and so on. You can also be able to check for inventory quality and age. This will help you know which machinery needs to be replaced, repaired, or updated.
Inventory Management Solutions
This is for those that sell products. Management solutions help you oversee the slow of your products and make sure that everything goes according to plan. They also help to create invoices, control the accounting, generate receipts, and purchase orders. Several solutions are available for both small and large businesses.
Most people believe that tracking sales stop at recording the items that are sold daily and how many were sold. Yes, it is highly important to record what you sell, how much you sold it, and how many were sold. However, it is more than that. It also includes analyzing the data to know what items sell faster and which are slower. You can also check for what season, time, day, and month has the most sales record. This will help keep your inventory in control and be prepared for times when the logistics are in bad shape like we witnessed during the pandemic period.
Hiring an inventory control manager is the best, however, it can be quite expensive. A consultant is more cost-effective and can do almost the same work as a control manager. They help to manage and develop your management system. They also ensure accuracy when receiving and sending shipments.
Inventory management is very important for both small and large businesses because, without good inventory management, a business can lose a lot of money. It helps set up a good foundation, and it reduces unnecessary costs. With these concepts, one can monitor his business, have full control over the profits and investments, as well as the level of accuracy when dealing with the company’s pieces of machinery.