Inventory management is a fundamental aspect of most businesses. Put simply, it is what a business does between purchasing and selling. Inventory management begins from the moment an order for new inventory is made, and ends when the final product is delivered to the customer. It is an ongoing process; a business will need to be on top of its inventory management 100% of the time. Because it is a fundamental part of operations, it is critical for business to get it right, yet this is often much easier said than done. Below are a number of the reasons why inventory management can be so hard.
One prominent difficulty is that there is no magic formula to inventory management, no ‘one size fits all’ approach that will work for any business, because all businesses are different. All businesses that sell goods will have to buy inventory at some stage, but the process that follows could be completely different depending on whether the businesses manufactures its own product from raw materials, or retails it. Most businesses will need to store items also, but the amount of space each shipment will take up, the temperature it needs to be stored at, the level of security needed, and the likely time it will sit in storage will vary across different businesses, sometimes greatly.
Another difficulty is that inventory management involves a significant degree of prediction. Whether the end customer is a consumer or another business, it’s impossible to predict future demand with perfect accuracy, and so forecasts must be made when deciding how much inventory to purchase. A business must find the right balance between having too little inventory, and risking stock-outs and consequential customer dissatisfaction, and having too much inventory, which means excessive holding costs such as storage, security, and obsolete goods.
Finally, inventory management is becoming more and more difficult in today’s marketplace, due to increasing global competitiveness. More firms are investing in inventory management software such as Unleashed, and that makes their businesses more efficient. Firms can now compete worldwide by selling over the internet, meaning that it is critical that businesses minimize inventory costs to remain price-competitive. Further, the online marketplace means that customers have a much wider range of choice. If a business runs out of stock, a customer can easily find a suitable replacement online, meaning that businesses today are at a much larger risk of losing customers.
Faced with the challenge of managing inventory in today’s increasingly competitive marketplace, businesses must use every advantage available to them. One vital tool is modern inventory management software. This software addresses many of the difficulties discussed above. It allows users to view and manage their inventory in real-time, and can aid users to develop inventory management strategies that are tailored to their business’s needs. Analytics can be performed so that accurate forecasts can be obtained, and therefore an optimal level of stock held. Most importantly, because it can be delivered through cloud software, this technology is now available to businesses of all sizes at an affordable price. Exploring the possibility of inventory management software could be just what your business needs to overcome the challenges posed by inventory management.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. When not writing about inventory management, you can find her eating her way through Auckland.