Inventory management often isn’t a front-and-center priority for growing businesses. With all of the demands and stresses involved in scaling up, developing a comprehensive inventory strategy can easily slips down the to-do list. But getting a handle on inventory performance is important for any business that is building a name and reputation. This is particularly the case for manufacturers, who face a range of inventory challenges through from design to procurement, production, sales and shipping. In manufacturing, the consequences of inventory failure are especially harsh – running a plant is expensive, but having to halt production because a single part is unavailable is even more costly.
Ensuring Inventory Continuity
Manufacturing is relatively unique in the sense that a much higher level of inventory precision is required. A manufacturer relies on having the correct inventory to produce a finished product; it is typically (although not always) unable to substitute alternative components or materials if something is not in stock. Therefore, it is crucial that a manufacturer keeps sufficient reserves of each part it needs.
One way of ensuring inventory continuity could be to order a large buffer of components and materials; however, this approach ties up capital and can involve significant inventory carrying costs (such as storage, handling and insurance). Implementing an inventory management system can resolve this dilemma. Many software-based inventory solutions take a perpetual approach, recording changes to inventory levels in real-time. Rather than guessing inventory levels between stock counts, users of a perpetual inventory system can continually monitor stock levels across a large number of components or materials, making it easy to know when to reorder more stock.
Enabling Lean Inventory
Because inventory management software reduces the amount of safety stock required, it frees a business from the need to project and procure significantly ahead of time. This means that the business can minimize stock and move from a forecasting model to a demand-driven approach to the supply chain. Toyota is well known for implementing just-in-time inventory, meaning that it produces “only what is needed, when it is needed, and in the amount needed.”
Making Inventory Control Simple
Managers in the factory environment often need to juggle competing responsibilities as part of their roles. Implementing a comprehensive inventory management system enables managers to understand and control the business’ inventory without detracting from other priorities. In particular, cloud-based inventory software is available anywhere with an Internet connection and is typically very intuitive to use. By simplifying inventory control, inventory management software makes it more likely that managers will make time for value-added inventory activities, rather than solely focusing on the core tasks needed to keep the factory operating.
Improved Cost Visibility
For manufacturers who frequently produce custom products, an inventory management system can take the pain out of costing and planning customer orders. Software with an assembly, or bill of materials function allows a user to collate all of the components and materials in the system before preparing a quote. By reducing the administration involved in processing a sale, the turnaround time to a customer can be reduced. Additionally, using a bill of materials for custom products ensures that the price quoted to the customer accurately reflects the cost of production.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.