As a component of supply chain management, inventory management oversees the flow of goods or components from manufacturing to warehouse, and ensuring goods are tracked and well stocked. This includes determining when to order products, in what quantities and from which supplier. Efficient inventory management ensures that your business will always have the right quantity of the right item in the right location at the right time.
Inventory management is also responsible for getting the goods from the warehouse to the relevant sales channels and customers. In managing your inventory, you’re aiming to to get inventory at the right place at the right time. This involves quickly reordering stock, having resources in the right place and having efficient process in place to receive and store inventory stock.
Unlike inventory control which has a limited scope, inventory management requires you to understand the supply chain process, from selecting good suppliers, purchasing raw materials, managing your inventory, to creating sales orders.
Who is inventory management important for?
As long as your business is stock-based, you need to manage your inventory efficiently. Whether you’re in the business of brewing, food manufacturing or coffee roasting, inventory management is a crucial part of your operations.
Why is inventory management important to my business?
Perhaps your staff have to make a trip to the stockroom each time there’s a question about what’s in stock, or you find yourself having to spend hours writing reports about your inventory on a daily bases. With a good inventory management system, you’ll always know everything about the state of your inventory and suppliers. Instead of wasting time on these tasks, maintaining your inventory management will allow you to spend more time interacting with your customers and enhancing the bottom line.
Accurate inventory orders
Businesses using a manual inventory management system are likely to recreate purchase orders from a template. While this system can work for businesses that are just starting out, it is prone to errors, including human data entry mistakes or miscalculations.
A great inventory management system will allow you to clone recent purchase orders and select specific item numbers, saving your business valuable time and money.
Ensure customer satisfaction
Satisfying your customers requirements to a high level is a surefire way of building loyalty. One way of achieving this is by meeting your customers’ demands quickly. An accurate inventory management ensure you can do so by enabling you to have the right products available as soon as your customers need them.
Customers will confidently buy from you, knowing you have the inventory to meet their needs. This is especially true when it comes to business-to-business transactions.
What can great inventory management do for my business?
Improve business flexibility
The business world is unpredictable and inventory management is no exception. Problems such as incorrect shipments, warehouse accidents, manufacturing mistakes and theft can occur without warning.
A key advantage which a good inventory management system will provide is the ability to be flexible and adapt to situations as they arise. With real-time inventory management software, you’ll have strong visibility over your inventory to address any problems as soon as they occur.
Lower holding costs
Holding costs are incurred through storing inventory before it is sold, including financing costs, warehouse rent, warehouse staff wages, lighting, security and more. These costs can be extensive and will severely undermine your bottom line when they are not kept under control.
The key to minimising holding costs is to only have as much inventory as you need. With an efficient inventory management system that helps you make informed decisions, you can avoid over-ordering inventory and being over-stocked.
Focus on growth
Sometimes it is very difficult for businesses, particularly small companies, to focus on growing because they are consumed by the day-to-day work they have to do. Improving the efficiency of your inventory management, means more time to focus on other profitable activities, like expanding into new product lines or improving marketing efforts.
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.