What Is Inventory Management?
Inventory management assists businesses in determining which and how much merchandise to order at what time. It keeps track of merchandise from purchase to sale. The technique identifies and responds to trends in order to ensure that there is always enough stock to satisfy client orders and that there is adequate notification of a shortage.
Inventory becomes revenue if it is sold. Inventory (although being represented as an asset on the balance sheet) ties up cash before it is sold. As a result, having too much stock costs money and lowers cash flow.
Inventory turnover is one indicator of good inventory management. Inventory turnover is an accounting metric that represents how frequently stock is sold in a given time. A company does not desire more inventory than sales. Inadequate inventory turnover can result in deadstock, or unsold stock.
1. Improved Overall Productivity
Employee efficiency can dramatically improve the overall health of your organization.
Without proper inventory management, you’ll be paying your employees to spend time digging through files, sending spreadsheets to one another, manually writing all reports, or visiting the warehouse if there’s a supply issue. Instead of wasting money on these chores, an effective inventory management system can help you avoid them entirely. Your staff will be happier if they can spend more time on important tasks that benefit the company, and you will be happier if you have more accessibility.
2. Always be aware of where your inventory is located.
Businesses with multiple locations may suffer when staff must frequently phone each other to locate or confirm the presence of a single piece of merchandise. Accurate inventory management can help you prevent problems with inventory location, such as difficulties in searching down a single product that a consumer desires.
3. Make every possible sale
Inadequate inventory management might also result in a sales loss. There are numerous ways for things to go wrong, such as when personnel believe an item is out of stock and notify the customer, only to locate the item later. Employees may also guide a customer to a specific place in the hopes of finding a specific item, only to find out that the location does not have it. The more precise your inventory management, the more satisfied your customers will be.
4. Consistently meet delivery deadlines
Many firms can quickly establish a bad image if they fail to deliver things to clients on time while they are out of stock. In many circumstances, a lack of awareness about the location of things between the vendor and the store or warehouse might result in late deliveries.
You can trace your inventory at every stage if you use an accurate inventory management system.
5. Modify Vendor Order Frequency as Needed
Having too much storage is the inverse of having insufficient storage.
Storage costs may quickly add up for many firms, and many end up holding a large sale simply because they over-ordered certain things to make storage more manageable.
It’s critical to keep track of how many of each item you have in stock as well as how much you have on order. This allows you to modify order frequency as needed, which might help you keep track of your inventory.
6. Facilitate re-ordering
Using manual Word documents to replicate purchase orders might result in mistakes in item quantities, currency exchanges, and item spec descriptions.
To avoid errors, good inventory management will allow you to copy recent purchase orders and choose specific item numbers and specifications from a simple selection menu.
With these advantages, it is easy to understand why establishing a solid inventory management system is advantageous to your business operations. Even if your operations are tiny, automating your inventory management can help your company develop while being manageable. You’ll be able to keep both staff and customers pleased while also remaining satisfied with how your business functions, without any of the hassles that might arise from a lack of inventory management.