The system of inventory management is a good practice for any company. If the inventory management system of a company is not being taken care of, the company is sure to face a potential inventory management error, which can become a very big challenge for the company to overcome. Proper inventory management of a company can either make or break the business.
The process of inventory management starts with a defined process, but the tools for it help to run a good inventory management system.
The three most important points for an inventory management system are :
- The process of inventory management system includes ordering, stocking and using a business material or products.
- There are various types of inventory, like raw materials, cycle inventory and MRO goods
- Prioritizing the inventory of your company helps to understand what is required or what we need to manufacture more frequently so we can match our customer’s needs.
Inventory management is a crucial piece of business profitability. But there are a lot of small businesses that don’t practice good inventory management systems, on the other hand, many businesses go the other way, overstocking items they sell. Effective inventory management lies somewhere between these two extremes.
While it requires more work and planning to achieve an efficient management process, your process will reflect your effort. Without effective inventory control methods, the supply chain suffers, you are not able to meet the requirement of the customer adequately, and ultimately, your company’s bottom line will reflect these inadequacies.
By choosing the right method for inventory control and developing effective policies to ensure that processes are followed, improving the accuracy of your inventory control methods and collecting accurate data to understand how to use that data to inform other areas of the business, are concerns with no simple solutions.
That’s why evaluating your company’s current business scenario to identify key needs and choose systems and develop processes that will best accommodate these unique needs is often a necessary first step for companies who are selecting an inventory management system for the first time. It’s also a good idea for companies to conduct these audits periodically to ensure that current systems and processes are adequate considering growth or change that has occurred within the organization.
To help companies choose or develop methodologies that are well-suited to business requirements here is a list of the 7 most important key points and expert tips on inventory control methods to help you choose the right inventory control framework to understand your company’s unique business needs and create and enforce effective inventory control policies.
Key to Good Inventory Management
- The Mini-Max Inventory control Method
This helps to define how much inventory you should maintain for a specific item. After a careful examination of your inventory needs, you set two lines, one at the top and one at the bottom of how much of each product must be in hand. When you reach the bottom line you order enough inventory of the products so that it doesn’t go above the top line. As long as you are in between the management of inventory is considered to be fine.
2. The ABC Method
One of the most commonly used inventory control methods in some industries is the ABC Method. One of the most common methods used across the retail industry and is at times coupled with other methods for better control on inventory. The ABC method is also considered to be the inventory classification technique where A-Category products will be the maximum grocers in sales and flagship products with a higher margin. And C-category products are bottom of the line contributing less to sales. These items are marginally important for the business and are kept only for the sole requirement of the customers.
3. Vendor Management Technique
For some industries, vendor management inventory is managed by the vendors or suppliers and while there can be more to it than this, at a minimum this means the vendor determines when to replenish and how much to replenish. It is a very common method that is used by both big and small businesses, as a key to managing a good inventory management system.
4. One of the key methods to have a good inventory management system is to reduce harmful consequences from mishaps such as the use of outdated or expired products
In large pharmacies, speciality in compound pharmacies, often the stores produce unwanted chemicals and it includes substances such as tar, phenol, and sulphur. Given the many materials and types of chemicals used and produced, it is especially important for managers to use chemical inventory management systems to organize and keep track of the chemicals that enter and leave a facility.
It is often said that, categorizing help. Similarly, categorizing your inventory into priority groups can help to understand the items that are required to order more and more frequently, also which are important to your business, but may cost more and move more slowly.
It is suggested by experts to segregate your inventory into A, B, and C groups. Items in the A-group are higher-ticket items that you need fewer of. Items in the C- Category is lower-cost items that turn over quickly.
The B group is what’s in between items that are moderately priced and move out the door more slowly than C items but more quickly than A items.
6. Tracking all the product information
It is important to make sure that there is a proper track maintained of the products information in your inventory. This information should have the stock-keeping units, barcode, data, suppliers and, countries of origin and a lot of numbers.
There are vendors that do the restocking inventories for the companies. And this is one of the essential key points of an inventory management system cause efforts and hard work of staff is saved, as well as time.
Following the above given 7 points, a good and synchronized method of an inventory management system can be run by any small or big business. The crux of the entire management is how diligently the tips are followed and how sincerely the process is managed by the company.