Every business has some form of inventory that someone at the office has to keep track of. Whether it is retail, manufacturing, or an office, there are always items and products that must be ordered for the business. But if the items are not tracked properly, they could end up causing the business to lose money. To keep up with inventory, every business should use inventory management. Inventory management is a system of overseeing the flow of inventory through a business and is an integral part of any company. It involves ordering, price comparison, space management, shipping, receiving, and controlling the products to make sure the inventory gets neither too high nor too low. If you happen to run a business and have never considered the importance of inventory, here is some useful information on why you should keep up with it.
Why Keep Up With Inventory
Bottom line, inventory for any business costs money. It doesn’t matter if the inventory is for resale or if it is supplies and raw materials for your own company. It can be anything from retail items to toilet paper for the office bathroom. It is all considered inventory and is tied in with the finances of the business. Inventories that are out of control can become a serious financial loss for a business. They require an investment in both dollars and time to keep up. Low inventories are bad because this means your business does not have enough resources to pull in its potential profit. On the other hand, a stockpiled inventory is equally as bad because it represents money that is just sitting there not being moved which makes it a waste of resources.
Successful Inventory Management
Successful inventory management seeks to control a balance associated between the inventory that comes in and the inventory that goes out. Balancing all of the various parts of inventory management means paying attention to these key elements: time, calculating buffer stock, movement of products, and accurate record keeping.
Time is an important factor because a business needs to understand how long it takes to process orders and arrange deliveries and shipments from different suppliers. Inventory management is also about understanding the amount of time it takes for products to be transferred out of the inventory. By having a working knowledge of time management and time flow it makes it possible to know when an order must be placed and how many units must be ordered to keep a business’ production running smoothly.
Calculating what is known as buffer stock is also a key to effective inventory management. What is buffer stick? Buffer stock is additional units over the required amount to maintain a constant level of production. In other words, all those extra parts and products that you keep on hand just in case something happens to the original item that is currently in use. For example, if your business has a couple of extra keyboards or monitors in storage in the event that a keyboard or monitor currently being used decided to become defective. By having this buffer, a business can be prepared in case of an emergency and keep their production from falling behind due to interruptions or lack of resources.
The movement of stock is a third element that is required for successful inventory management. Units, products, and stock all go through many processes while they are in inventory. Proper inventory management moves units at a rate that is beneficial for a business. It also tracks all resources and materials as they are used to manufacture finished products and recognizes when to adjust the amount of units that are ordered to keep up with fluctuating inventory. You definitely do not want your inventory top get too low before you decide it is time to order more units.
Probably one of the most important elements of successful inventory management is keeping accurate records of everything from unit amounts of available materials to the number of finished products that are ready for shipment. Every business needs to keep a record of newly completed goods balanced against their inventory totals as well as keeping up with what gets shipped out to which buyers. If any products are returned, inventory management has to keep the total amount of what was returned as well as whether to classify the products as damaged or suitable for resell. By keeping up with inventory records, any salesperson or manager within a business will be able to know what the company has ready to sell, how many units are available, and when to reorder more supplies. Accurate record keeping is also important for tax purposes.
How To Implement Successful Inventory Management
There are many steps and methods a business can go through in order to have a successful inventory management system. Some businesses have adequate inventory systems in place but many do not. To have an inventory management system that gives a company the most potential from its inventory, it is a good idea to implement each of these following characteristics.
- To protect against theft, limit the number of people that have access to your warehouse. Theft is an ongoing problem that can rob a business of substantial sums of valuable materials.
- Establish an accurate stock list for your inventory.
- Assign bin and pallet locations in your warehouse. This makes shipping and receiving run much smoother.
- Record all products that leave your warehouse. This is a must. Under no circumstances should product or shipment leave your business without being entered in the computer.
- Process paperwork in a timely manner. Don’t let it pile up. All paperwork of everything that came and went should be filled out by the end of the day.
- Set objectives for your buyers. You can reward buyers according to the level of customer service and return on investment for the product which they purchased.
- Make sure everyone in your company is aware of the negative effects of bad inventory management. This includes everything from theft, damage, or lost products.
- Ensure that stock balances are accurate and set up a comprehensive cycle counting program.
- Transfer excess inventory stock to another branch or office that might need it. This saves on money that would normally have gone to purchase the inventory and keeps dead stock from sitting around and not moving.
- Make inventory management considerations part of your annual or quarterly strategic planning.