Managing inventory is a key process in the success of any business. Neglecting inventory management procedures risks inhibiting efficiency and productivity, and of course profitability. Moreover, inadequate inventory management procedures can lead to customer dissatisfaction. This article outlines four effective methods for inventory management to ensure best practices in your business. Techniques covered include Just-in-Time inventory management, downloading inventory software, reducing inventory carrying costs and effectively controlling stock levels.
One of the most popular methods for inventory management is known as Just-in-Time (JIT) inventory control. This method seeks to deliver inventory to the production floor just in time for use, to reduce wastage and improve efficiency and productivity.
The aim of the JIT system is to provide exact quantities required to complete current production; no more, no less. While this method can make manufacturers dependent on the reliability of their suppliers to provide on demand, in manufacturing environments the supplier’s warehouse is usually very close to the production warehouse.
Downloading Inventory Software
Conducting inventory management processes manually can be a time consuming and error-prone task, especially for larger companies. Downloading inventory software is an excellent inventory management technique, as it can drastically improve efficiency and productivity.
By downloading inventory software, you will be able to track and trace stock levels, and quickly look up product details with devices like smartphones or tablets. This is a convenient and reliable way to manage inventory.
Downloading inventory software will also allow you to see past sales trends and to predict which products may be fast or slow moving. This will help you predict changes in demand, so that you can order the right products to satisfy customer needs.
Smaller businesses should avoid ordering too much stock, but also avoid under-stocking. Having the right amount of stock can be a difficult balancing act, but getting the supply-demand relationship in balance is a great inventory management technique. Too much stock will make it difficult to manage inventory, and too little puts you at risk of dissatisfying customers.
For larger businesses, however, carrying extra inventory in the form of safety stock can be an effective inventory management technique. Issues such as supplier performance problems, long lead times and material uncertainty may require that larger companies invest in an additional amount of stock carried over the normal stocking level as a buffer against uncertainty.
Reduce Carrying Costs
Finally, carrying inventory comes with associated costs. Therefore, good inventory management procedures will work to reduce these costs as much as possible. One effective way of doing this is by employing the economic order quantity (EOQ).
This method uses information about annual usage in units, ordering cost in dollars per order, annual carrying cost rate as a decimal of a percentage, unit cost in dollars and the order quantity in units. With this information, EOQ aims to find the order quantity that has the lowest total cost of carrying the inventory, to reduce carrying costs and free up your finances for other important tasks.