For any business that uses a warehouse or storage facility to maintain stock, inventory management is a crucial process that, if done well, improves the effectiveness of the supply chain. By implementing an inventory management process that works, businesses can ensure that the items they need are available when a purchase is made and materials are available for products to be manufactured. In turn, customers won’t see a significant delay to orders, the reputation of the business will remain intact and the supply chain will run as smoothly as possible.
A fully functioning inventory management process is a key part in the running of a business of any size. As such, it’s important that business owners analyse their own to ensure that it’s not lacking in any area that could cause harm to their supply chain, their business or their reputation. In this blog, we explain the core objectives of inventory management before offering advice on managing inventory and how you can improve the inventory management process.
What are the objectives of inventory management?
The primary objective of inventory management is to ensure that business processes involving inventory are operational in the most effective
way possible. It’s also important that the finances around inventory management are monitored in such a way that the optimum service is provided without overspending unnecessarily. However, other objectives to inventory management include:
- Aligning with sales activities to avoid financial loss
- Avoiding overstocking or understocking
- Building a consistent structure to benefit the ordering process
- Carrying out both short and long-term planning using relevant data
- Centralising purchasing
- Controlling cost of materials
- Ensuring continuous availability of in-demand inventory
- Meeting customer demands
- Minimising losses from damages, deterioration, pilferage and wastage
- Monitoring fluctuation in the value of the stock to keep prices reasonable.
How do you manage your inventory?
As the previously mentioned range of objectives suggest, managing inventory incorporates a number of duties and considerations.
A typical inventory management process is as follows:
- Based on the service you provide, determine what goods you need. For example, if you’re a manufacturer, identify the materials you need to make products, or if you sell pre-made goods, focus on having enough stock to sell to customers.
- Conduct market research to understand which items are selling and which aren’t. After you’ve done this, use your findings to decide what items you need and which items may not be valuable enough to keep.
- Work out the quantity of items you need in your inventory, the cost of delivery for these items and the storage space they use up. Facilitate more stock and storage for items that are more in-demand, and less for items that aren’t.
- Calculate a minimum stock level, and when your stock reaches this level, use it as an indication that you need to replenish. You can then identify how long it usually takes for stock to drop and preempt replenishment.
- Order items in your warehouse based on demands, with more in-demand items at the front, allowing for quicker shipping.
- Use a manual or computerised system to note down specific information about all item details such as name, description, value, location in the warehouse and supplier. You can then keep track of how long it takes for the supplier to provide these items and monitor stock to know when to replenish.
- Apply suitable security tags to all items in your inventory as a way of guarding against thieves. For additional theft prevention measures, ensure that the warehouse is secure and only authorised people are allowed in.
- Use an electronic programme for scanning barcodes on each item as a way of tracking sales automatically and keeping tabs on stock more easily.
How to improve inventory management process
If you have an existing inventory management process but believe it isn’t entirely effective, you may want to consider ways to improve it. Below, we’ve outlined some factors you should look at that could benefit your inventory management process:
Data analysis –
Using real-time data can help you to understand the inventory management process from an organisational level and see whether or not it’s performing as it should be. At this point, an inventory manager can choose to alter different aspects of the inventory management process depending on their findings.
Mobile management –
Technology is frequently regarded as a crucial tool for bringing traditional processes into the 21st century and, in turn, boosting results. One way of utilising technology effectively is by using a mobile application. Through this type of technology, you can keep track of inventory, document product details, pricing, offers and promotions, and monitor real-time order status and changes to stock.
By breaking down your existing inventory management process, you can analyse every part, identify what works and what doesn’t, and make changes based on these observations. Carrying out this process could mean minimising operational costs, maximising profits, removing unneeded components and boosting efficiency.
With technology constantly evolving, inventory management is made easy with platforms, programmes and tools that automate many of the tasks that were previously conducted by human operators. Bringing one, or several, of these elements into your inventory management process could mean cutting costs, speeding up processes and allowing employees to work on other, more pressing tasks.