Today’s companies need to have the right inventory on hand, whether raw goods like crude oil and natural gas or finished products like AI computers. Too little stock, too often, can send customers to competitors. Excess stock can result in increased costs due to storage or damage, especially from perishable goods.
Inventory management focuses on tracking a company’s inventory in real time. The following management tips ensure the right products and quantities are available when a sale occurs, while minimizing risks due to running out of product or overstocking.
- Understanding Inventory Management
- The Benefits of Effective Inventory Management
- Common Challenges and Concerns
- Top Five Inventory Management Tips For Businesses
Understanding Inventory Management
A company’s inventory is made up of items that it sells or uses in production. Inventory is usually broken down into four types:
- Raw materials
- Unfinished products
- Finished goods and maintenance
- Repair and operating supplies
Inventory management is a part of the supply chain and focuses on keeping track of the items, from where they’re stored, where they are in the shipping process, and, finally, if more is needed (restocking).
The Benefits of Effective Inventory Management
Inventory management tracks the various types in real-time. The goal is to ensure the business has the right items in the right quantity when needed, whether for sales to customers or as raw materials for producing more goods.
The benefits of good inventory management are numerous:
- Improved efficiency by keeping only the inventory needed, saving on storage space and lowering the risk of value loss.
- Reliable financial reporting thanks to more accurate valuation of the inventory.
- Available extra inventory (safety or buffer stock) to draw upon due to unexpected spikes in demand, supplier issues, and other business vagaries.
- Greater customer loyalty can be achieved by filling orders quickly and delivering them promptly.
- Avoids unnecessary spoilage of perishable goods and similar items.
- Prevent the creation of dead stock and other unsold inventory due to changes in style, trends, seasonality, etc.
Common Challenges and Concerns
Managing inventory is no easy task. Even small mom-and-pop shops can quickly become overwhelmed tracking the whereabouts of a few hundred items on a day-to-day basis. The following are some challenges companies face in handling their inventory.
- Massive inaccuracies result when different inventory management systems are used across parts of the supply chain. An example is manually recording parts as they come into the company warehouse while scanning finished products using the latest industrial tablets.
- Inefficient or non-existent procedures for handling inventory. In the warehouse example above, many steps need to be followed: receiving and putaway of the inventory, picking the item, packing and shipping, etc., to name a few. The wrong step (or lack of) can slow down or even halt delivery, costing time and money.
- Lack of proper care and storage of the stock. Perishables such as dairy and fruit have special processing needs and limited shelf lives, making them costly to lose and replace.
- Running out of stock/overstock. Keeping too little inventory can result in lost sales (and customers), while not selling fast enough costs in storage and depreciation.
- Complex supply chains, especially since today’s manufacturers and wholesale distributors can be found all over the world. Events such as the shutdown of a key factory or tariffs on certain materials can dramatically halt deliveries to a company or stop them entirely.
Top Five Inventory Management Tips For Businesses
So, how does one maximize the benefits of inventory management? What needs to be done to ensure the right inventory is available in the right quantities most of the time?
Here are five tips to consider:
Prioritize Inventory
All inventory is not worth the same. This is especially true for goods to be sold. Divide your inventory into the following groups:
- A Group: There are the high-ticket items. You need fewer of these items.
- B Group: These moderately-priced items move more slowly than C Group items but faster than A Group items.
- C group: Items in the C category are low-cost and turn over quickly.
Have Good Inventory Management Software
The right software can drastically streamline many management processes and procedures:
- Keeps track of inventory in real time.
- Helps forecast demand.
- Prevents product shortages / excess stock.
- Makes inventory analysis easier.
- Has easy access from/to Point of Sales systems.
- Quick and painless barcode/QR code scanning.
Before you choose an inventory management system, make sure you and your team are on the same page about what and how it’ll be used. This includes determining if the inventory can be successfully tracked or not. Pre-orders and many stolen goods cannot be tracked. Same with a product’s obsolescence, etc.
Track All Product Information
Once you’ve divided your inventory into groups, enter the information into the inventory management software. At the very least, that information should contain:
- SKU numbers
- Barcode information
- Supplier information
- Countries of origin (A must in today’s global economy)
- Lot numbers
A special note on the item’s cost. You may want to enter the information into the software, as it could prove helpful in any pricing analysis (example: if the item is seasonal).
80/20 Rule
This tip is based on the assumption that 80 percent of your profits will come from 20 percent of your inventory. Thus, those items should be in the A and B Groups and managed accordingly.
System Integration
You’ll want to make sure your inventory management software is compatible with the rest of your tracking tools. Example: the barcode readers used by your warehouse workers should be able to upload their information to your system accurately and without fail. This tip is even more crucial if using advanced technologies like the Internet of Things and artificial intelligence.
How Cybernet Computers Can Help You Optimize Inventory Management
Inventory management is an essential part of the supply chain, ensuring the right products in the right quantities are available when requested. When mismanaged, the consequences can be dire, with companies losing profits and customers. Tips for good inventory management include focusing on inventory that brings in profit and selecting the right tracking hardware and software.
Contact an expert at Cybernet Manufacturing if you’re setting up an inventory management system at your company. We offer a range of industrial computers, built from the ground up to handle challenges common in many industries, like extremes in temperatures. Can’t find what you’re looking for among our pre-built rugged mini PCs and industrial panel computers? Let us know! We’re an original equipment manufacturer and have absolute control of our products’ design and bill of materials. We’re confident we can work out the ideal solution for your exact inventory management wants and needs.