There are several things that go into managing a business and optimizing its performance. These are often reflected in the balance sheet, customer satisfaction and low staff turnover amongst other factors. One component of managing the business effectively and which has a big impact is inventory control. To better achieve inventory control, there are specialized software packages such as Unleashed. However, before purchasing a package, you need to be sure of the benefits to your company’s performance.
It is well-documented that a sure fire way to reduce profit margins and cause stress to the company is to have excess raw material sitting, needing to be stored and not being turned into product which can be sold to the customer. Not only does this scenario not make business-sense, but from a more practical point of view, it clutters up the workspace or warehouse creating clumsy operational processes which further increases production times and decreases actual product being made and sold. This way of manufacturing is stressful for employees, which adds to dissatisfaction. At least there is a solution. Effective inventory management can benefit your business in the following ways:
Reduced warehousing costs
Having a well-organized warehouse where everything has a place and is in its place is sensible and very beneficial for business running costs. Organization makes it easy to ascertain when raw materials need to be ordered or more product needs to be manufactured and ordering or manufacturing ‘just-in-time’ means that less is stored. This results in a reduction of storage and insurance costs and a reduction in risk should something adverse happen to the stock.
Reduced labor costs
Managing inventory costs money – unfortunately this is a given. However, having an automated system such as Unleashed will inevitably reduce labor costs as no one is required to manually enter data, routinely shift product to ascertain what is available, and to constantly count product and then make decisions about when and how much to re-order. The system takes out the guesswork and allows for time that would be spent on managing inventory to be spent on making key business decisions or actually manufacturing product.
Increased performance from better lead times, shipping times and informed buying
Having a grip on inventory equates to being able to better forecast production demands which in turn allows for more accurate ordering and taking advantage of financial incentives from increased lead-times to the company’s suppliers. This also means that raw materials won’t to be shipped urgently from a lack of forward planning thereby reducing expedited shipping costs.
Customer satisfaction and reputation
Customer satisfaction and endorsement is one of the end goals of a manufacturer and is guaranteed when product is always available (or an accurate forecast is), and the company always supplies when they say they will. Achieving these things is certainly a lot easier when inventory is under control from effective management. Good inventory control means avoiding having to inform a customer that a product is not available, or worse yet, breaking a promise to a customer from ignorance of what is actually in the warehouse. It is both price and reputation that will keep a customer coming back and resulting in sales – and both of these components need to be taken seriously.
There are so many benefits, both tangible and intangible, of having accurate inventory control and it is in the best interests of the company to explore these further and consider the introduction of inventory management to the manufacturing process.
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.