Inventory is essential for businesses it does not matter what is your business type! Because inventory has a crucial role to play. Without inventories, production work cannot be finished. However, the inventory shall be only purchased in a limited quantity because after some time inventory quality decrease and they can also be broken or may expire.
Lots of people think that inventory management is a simple job. But on the contrary, it is complex and hectic. In this blog, you will know what are the common inventory management problems and how to overcome them, and important inventory management techniques! But first, let us know basic inventory management!
What is Inventory Management?
Inventory management is a systematic method of sourcing, storing, and selling inventory. Inventory can be either raw material, MRO (maintenance repair operation) goods, or complete end product. It is also known as maintaining the right level of stock in the right quantity at the right time and location. Big companies manage their equipment with this method. There is specific software is available for inventory control.
Managing the inventory life cycle is one of the important jobs of effective inventory management. It ensures that inventory is utilized before inventory is expired. It also helps in providing a complete view of inventory. In order to increase visibility and accuracy of inventory, some organization utilizes barcode, QR Code (Quick Response Code), RFID (Radio-frequency identification) technology, etc. Inventory management is essential for all industries such as manufacturing, retail, etc. Most of the companies rid of their inventory issues with proper inventory management methods.
What are the common problems in inventory management?
The companies facing these common problems in inventory management are as follow:
Inventory overstock – Inventory overstocking is not a new issue yet organizations do it. The main reason behind it that retailers think that they will finish stock in no time but different result occurs. The consequence is businesses suffer from loss. Many organizations had to shut down their businesses due to the same reason.
Low on stock Inventory – Many organizations suffer from loss because they do not have any stock left to sell. As a result, potential customer loss and creates a bad impression in the customer’s mind. It has been seen that once a customer is disappointed then they don’t usually return to the shop again.
Deadstock – Deadstock means loss of money. In simple words that inventory that is not sold or not turned over is deadstock. Deadstock occurs mostly because it is purchased and forgotten to use or somehow it is misplaced. They cannot be returned as they are useless.
What is the solution to all these problems?
To manage all these issues there is one solution that is automated software. It provides a solution that is inventory tracking. Inventory tracking is essential for business if you want to save money and enhance productivity. This software keeps track of inventory, when you keep track of inventory you will know an actual number of stocks in real-time. Proper maintaining of inventory data helps companies to know the exact figure at the time of crisis or off-seasonal.
Furthermore, this software allows you to set a re-order point. It means that it will alert the responsible person about the low inventory. After that stock refilling process begins.
You can try this process for every required product. When you monitor every inventory, you can set an alert about inventory for expiry so that smart decisions can be made. The Managers will get notification of low inventory by setting these alert features. Managers can use this technique to avoid the deadstock issue.
Another major benefit of using inventory management software is that it analyzes data and track the trend. It helps in making crucial business decisions related to inventory purchases. So that you can prepare for the upcoming season and selling numbers can be enhanced. When sales numbers will increase profit margin will increase. This benefit helps companies to get ready for business at the worst possible time.
According to Statista, “In 2019, 32 percent of grocers in the United States stated that they had a strong interest in real-time reporting technology. Fourteen percent stated they had a strong interest in autonomous delivery vehicles.”
What are methods used for effective inventory management?
There are many methods used for effective inventory management. Some are discussed below:
Reorder point – This is one of the most effective methods for inventory management. It is also used by automated software as we have told above how this method works! This method saves from overstocking and understocking issues.
ABC Categorization – ABC Categorization method is used when there are different types of inventory on the premises. For instance, a retail shop has a variety of inventory that needs to be categorized. According to the ABC categorization method, you can divide each inventory type into Category A, Category B, Category C. Category A can contain those inventories which are expensive. B Category can contain which are less expensive and more in number than category A. Category C is economical, it can contain the least expensive inventories but they are large in numbers.
FIFO method – First in first out method is simple and effective as well. In this method, old inventory is put in the front row for selling. This method works on the simple philosophy “old inventory goes out first”.
Conclusion – With these inventory management techniques of inventory management software you can easily avoid inventory management issues. Inventory management cannot be handled with the manual process. You will end up making lots of mistakes and miscalculations in inventory because there are lots of factors that need to be considered. So, we need automated software which will help to handle all these messes. This automated software must be cloud-based technology for easy going.
Inventory management software is a type of asset management software that allows you to take a decision keeping all aspects in mind. Furthermore, the software provides real-time numbers so it becomes much simpler to make decisions about inventory.