Inventory management has always been a struggle for business owners. Without a well-organized flow of parts and products in and out, the business will fail. Unfortunately, inventory management isn’t easy: Inventory is constantly fluctuating as supplies are replenished and customers make purchases, and management of the influx and outflow of several products is exceedingly complex; few businesses offer just one product.
Inventory management has a long history and business leaders have developed several methods for making the chore more efficient and accurate. Software companies are also developing digital solutions that drastically reduce mistakes and provide other valuable services.
The components of inventory management
Contrary to what many novice business leaders assume, inventory isn’t just supplies that are transmuted into sales. In truth, the term “inventory” comprises everything from physical storage space to the actions of ordering and distribution. While the parts and products that are eventually sold constitute a significant portion of inventory management, there are other components that business leaders often overlook, including:
- Time – Parts and products don’t appear in business warehouses as soon as they are needed, and they don’t move themselves into customer hands. Businesses need to budget time for delivery, production, packaging, and distribution to develop accurate schedules for ordering.
- Buffer stock – Selling out should never be a business’s goal. When products aren’t available, customers can’t make purchases, and the business loses money. Thus, there should always be emergency or “buffer” stock available to use while more stock is on its way.
- Records –Records must be meticulous and dynamic, which is why so many businesses fail at proper inventory management.
Popular inventory management strategies
Several different strategies have arisen for inventory management. The framework implemented will depend on a business’s organization and style, but it should always be efficient and accurate. Some of the most popular inventory management strategies are:
- Just in time (JIT) – Ideal for smaller businesses with lower backend budgets, JIT is essentially a “receive-as-needed” method. On one hand, there is little overproduction and waste; on the other hand, it requires precise calculations and active teams. Even done right, the lack of buffer stock might cause delays in distribution and disgruntled customers.
- Materials requiring planning (MRP) – This strategy relies entirely on forecasts from sales teams, which often results in overproduction and potential waste. To be performed well, MRP demands strict record-keeping regarding sales history and demand, as well as product ordering.
- Perpetual inventory – Businesses with a perpetual inventory strategy use a point of sale (POS) system to record inventory, so there is little need for manual inventory management. This method is usually employed by businesses dealing in expensive products, but more and more businesses are seeing the disadvantages of manual inventory recording.
- Periodic inventory – Even with a perpetual inventory system, some businesses find it reassuring to perform manual checks. In periodic inventory management, team members intermittently compare sales numbers with existing stock. This is an ideal option for smaller businesses that are wary of JIT and MRP.
Inventory management software solutions
At the lowest levels, inventory management teams can struggle executing their tasks, meaning that products never get ordered, are distributed improperly, or otherwise does not become available for purchase. At upper levels, inventory management can be hindered by poor communication and decision-making. Thus, it is best for businesses to automate inventory management as much as possible.
The best inventory management software is dependent on individual businesses: No two businesses have exactly the same inventory needs, which means business leaders must consider different aspects of inventory software before making a decision. Specifically, software should be:
- Industry compatible – Software should be able to adapt to industry inventory needs, such as raw materials versus parts versus complete products.
- Hardware compatible – Not all software works on all machines. To avoid reinvesting in new hardware, businesses should look for inventory management solutions that can run on existing devices.
- Scalable – All businesses should be able to grow, and software solutions should be able to grow with them.
All businesses can benefit from inventory management software – it’s just a matter of finding the right option for each business. The days of manual inventory management are over; it’s time to upgrade to a better solution.eletter-10-03-2017