Successful inventory management involves creating a purchasing plan that will ensure that items are available when they are needed.
An inventory can simply be defined as the goods, materials and stocks that a company or manufacturer have at hand. Inventory management is a core task in companies and business organizations concerned with the selling and manufacturing of tangible products and goods. It is concerned with the controlling of the storage, ordering and usage of the inventory or stocks a company has at hand.
The company’s investment is tied up in the inventory until the stock is sold, or the material that it is used in producing is sold. Inventory management is quite in a business enterprise as it saves the business a great deal of money. Companies spend much money in insuring, storing and even tracking of the inventory and stocks. Thus, when properly managed, many costs can be saved.
What is Inventory Management?
Methods of Inventory Management
There are basically two methods of inventory management and they include
- Just – in – time inventory management method,
- Material requirement planning.
In this inventory management, companies ensure that they do not pile up stocks and maintain high level inventory management. This method is quite simple as it involves the reception of the items when they are required. This goes a long way in order to reduce the amount spent on the insurance, tracking and storing the stock.
Material Requirement Planning
Forecasts and sales are used by the companies involved in measuring and ascertaining the amount of materials needed in the inventory. Thus, this method of inventory management utilizes the past sales as well as forecasts to determine the quantity of stock to order and to purchase.
What Does An Asset Tracking Solution Look Like?
How to Ensure Effective Inventory Management
The inventory managers are responsible for the management of inventories in an organization. They are professionally trained to track the inventory and ensure that losses are minimized.
- To keep losses low, there are things to ensure and also to avoid.
- This is important to make it sure that the inventory is not too much or too small. The inventory or stock at hand should be kept minimal. If the stock is too big, y one may end up selling the redundant stocks at giveaway cost.
- Tracking of the inventory in companies is critical. It is important to leverage the required tools to track inventory in order to avoid loss and shortage.
- In large organizations, the inventory may get too large that it becomes impractical to count all the stock at each point in time. In such cases, you need to have priorities and go by them. This simply implies giving attention to those stocks that are high selling and more important than others. Such stocks should be counted more often than other less important stocks.
- Most companies use spreadsheets in inventory management. However, spreadsheets could be easily deleted, and the changes you made could be easily lost. There are lots of advanced software that can be used in tracking and managing inventory. A good example of such software is Quickbooks and Peachtree. With these pieces of software, you will get great value for your money.
- It is also important to backup your inventory. Many uncertainties exist today that might simply cause you to lose those data. By backing up your data, you will ensure that loss and mismanagement of inventory will be reduced.