Companies often fail to manage inventory, or at least, don’t manage inventory effectively. Understanding the need for effective inventory management is one thing. Knowing how to implement it is another. With that in mind, what are some reliable strategies for improving inventory control?
Categorisation, integrated mobile technology, effective warehouse management systems and supplier relationship management are only four of many strategies. They provide a basis to perfecting inventory management through the utilisation of technology-based inventory control solutions.
Retailers and manufacturers often hold thousands of individual items or parts. It is therefore imperative to concisely categorise these items into an easy to understand, user-friendly system. Inventory classifications are generally based on the accounting method of inventory categorisation.
These methods differ but there are a few common methods used for inventory control classification. The ABC method classifies items according to their value and documentation requirements. Items of the highest value, for example, ‘A’ are carefully controlled, while minimal value items, ‘C’, maintain the simplest of records and controls because they have the lower assigned value.
The ABC method avoids a one-size-fits-all approach whereas other methods, such as the ‘first in, first out’ method, classifies inventory based on assigning the oldest inventory cost of goods sold, with recent inventory acquisitions costs remaining as ending inventory. The weighted average method, by comparison, divides the cost of goods available for sale by the quantity of goods available for sale.
Whatever the selected method of categorisation, all inventory, whether parts or finished goods should be neatly and clearly categorised with concise groupings and clear labelling. Keep in mind that every product and stock keeping unit will have a unique pattern of supply and demand variability.
Warehouse Management Systems
Efficient warehouse management requires a flexible location system, and customised categorisation for easy storage, movement and picking. An effective system will increase inventory accuracy, while reducing cycle times and handling costs.
Unlike financial accounting classifications, warehouse classifications should be clear and labelled relevant to the specific inventory items, making them easy to locate and ship. High turnover items should be positioned closest to the dispatch area to reduce handling and expedite shipping.
Warehouse management systems will also provide first-rate inventory scheduling and stock control options. Additionally, warehouse management improves inventory optimisation to automatically monitor and manage any variability in supply and demand.
Perfecting Inventory Control Through Mobile Technology
Integrated mobile technology allows salespeople to interface with warehouse management systems through applications on their mobile phones. These mobile applications provide easy, real-time access to accurate inventory data and information. This helps to improve customer service and overall supply chain efficiencies.
This mobile technology directly improves inventory control because of its connectivity to point of sale through a mobile device. If a customer, either online or through a sales person, wishes to purchase a product, they will be immediately informed of the products availability.
Implementing effective classification, warehouse and technology systems can only be successfully achieved when you have successful supplier relationships. Supplier issues can impact all three of these strategies. It is therefore imperative to build strong supplier relationships and review these relationships to ensure they are adequately meeting your business needs.
Monitoring supplier performance through your warehouse management system is possible through the detailed and customised reports it will provide. These reports will demonstrate supplier performance, reliability and identify any problems within the supply chain, providing opportunities for improvement.
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.