Why is Inventory Management Important

image

Companies that use inventory management effectively are more likely to be successful. Companies can automate their goods' ordering, storage, and optimization with inventory management software. We will discuss the importance of inventory management and the benefits and examples that managers should know. Continue reading to discover the secrets to the inventory management process and how to get a competitive edge.

​What is inventory control?

Inventory management is the process of ordering, storing, and selling goods and services. This discipline includes the management of different supplies and procedures.

The flow of raw materials from the point of purchase to the final product is one of the most important aspects of inventory management. It is important to reduce overstock and increase efficiency to keep projects on schedule and within budget.

The right inventory management strategy for the industry will vary depending on its size and the products required. An oil depot, for example, can store large quantities of inventory for a long period. For businesses that sell perishable goods, such as fast fashion items, it can be costly to keep track of your inventory.

You can account for inventory by grouping it into four categories: first, last, in-first out, weighted average, and first-in-first-out. A company's raw materials are used to make its final products.

Different inventory management methods can be used depending on the company it works with. These include JIT, material need planning, and days sale of inventory.

Other methods can be used to analyze inventory depending on national and local regulations. The SEC, for example, requires public companies that report the existence of a so-called LIFO Reserve.

Frequent inventory write-offs could indicate that a company is having difficulty selling its products or is susceptible to inventory obsolescence.

You can remove obstacles, achieve clarity and exceed your goals with the most potent work management tool.

Walton College's Supply Chain Management Program's introduction to inventory management covers everything from forecasting and point models.

​What is the importance of inventory management?

Inventory is one of the most valuable assets a company has. Inventory can negatively affect many industries, such as manufacturing, retail, food service, and food services. Inventory can be a liability as well as a risk. Inventory can be vulnerable to theft, damage, or spoilage. A large inventory can also result in a decrease in sales.

No matter how big or small your business is, a good inventory management system can make a huge difference. This will help you track all your supplies and determine exact prices. You can use it to manage unexpected changes in demand and maintain product quality without compromising customer service or product quality. This is particularly important for companies that want to be more customer-centric.

Companies with complicated supply chains face difficulty balancing the risks associated with overstocks and shortfalls. Inventory is a company's current asset. It must be sold within one year. It must be regularly measured and counted to be considered a current asset.

​What can inventory management provide as a means for?

Any inventory management system should help warehouse managers track the inventory levels of their products. This allows them to see the entire chain and monitor the supply chain.

These benefits can be both financial and operational. It will improve performance and prevent theft by providing product tracking and security.

Managers can enhance customer service by using their inventory management strategy. Inventory management is useful for businesses that must control seasonal merchandise and new bestsellers throughout the year.

​Inventory management has many benefits.

The principal advantage of inventory management is resource efficiency. Inventory management is intended to prevent the buildup of unused items.

It is also possible to manage inventory.

  • Correctly order and time supply shipments

  • Protect your product from theft and loss

  • You can manage seasonal items all year

  • You must deal with market changes or sudden demand

  • Ensure maximum resource efficiency

  • Improve sales strategies using real-life data

Also Read : Understanding ERP In Inventory Management

​Different types and steps of inventory management

For finished goods, most product inventory management systems follow a similar fundamental process:

  1. Your warehouse receives the products

  2. All products are checked before being stored

  3. Managers and crew update inventory levels

  4. Customers place an order

  5. Based on inventories, orders are approved

  6. Products are pulled and packed

  7. The inventory levels have been updated again

The process is quite straightforward and sometimes requires software support. There are variations depending on the type of inventory management that you use. These are the most important types to know:

  • Raw materials are the product pieces you need to be shipped to you and then assembled by your team. These must be included in inventory software that tracks them.

  • In progress - This category includes products made from raw materials currently assembled, grouped, or modified. This stage of inventory management can have several active projects at once.

  • Repair - This segment includes scheduled maintenance, updates, as well as refurbished goods. Repairs can be done in-house or with the help of a third party.

  • Final goods - Anything that can be shipped to consumers or businesses is considered complete. They must be kept current and monitored for changes to meet the demand.

​Inventory management techniques

It can be difficult to make business decisions without accurate inventory records. There are two main ways to keep track of inventory: the perpetual inventory method and periodic one. There is a major difference in how often the data is updated. You may choose to use any inventory management method, regardless of how frequently you track inventory optimization.

  • ABC Analysis - ABC (Always Better Control Analysis) is inventory management. It separates items into three groups based on their pricing. Items in the B category are generally cheaper than those in the A category. The C category also has the lowest prices of the three.

  • EOQ Model - Economic Order Quantity can be used to plan and order an order quantity. This involves deciding how many inventory reports should be kept in stock at any time. Once the minimum order is reached, the order will be reordered.

  • FSN Method - This method of inventory control tracks all items that are not in use or not needed all the time. The inventory is then divided into three categories: slow-moving inventory (fast-moving) and non-moving.

  • JIT Method - Manufacturers use Just In Time inventory manager their inventory levels. This saves manufacturers money because they don't have to store and insure excess inventory. It is, however, risky as it could lead to stockouts and increased costs.

  • Minimum Safety Stocks - The minimum safety stock is an organization's inventory to avoid a stockout.

  • MRP Method - Material Requirements Planning allows manufacturers to manage their inventory accuracy. This involves planning the order of goods based on the sales forecast. The system's data is used to plan the order.

  • VED Analysis - Organizations use VED to manage their inventory. This technique is used to manage vital and desired spare parts. The high production volume usually justifies a low inventory solution.

​Arion ERP: How to Improve Inventory Management

A company must ensure that the inventory database information is accurate. To prevent data from becoming distorted, it should be kept updated frequently. Arion ERP can help you accomplish exactly this.

Arion ERP's product management tools allow you to manage all the activities of your product team in one place and make the most of every project. Arion ERP's product automation tool helps to accelerate product launches through a simplified approach. Managers can manage inventory analysis and shipping by planning and allocating tasks from a single dashboard.

Arion ERP allows you to create workflows that keep everyone informed about the latest inventory counts progress. Interactive charts and task dependencies allow team members to identify and prevent delays. The platform's advanced CRM allows you to communicate with clients and vendors.

Arion ERP's advanced insight tools enable you to track your progress in real time, which is crucial for any inventory management strategy.

​Why choose Arion ERP for your inventory management software?

Arion ERP is a project management solution that allows you to meet your inventory management goals and maximize the benefits. Arion ERP can help you manage your inventory accurately regardless of the types of inventory management system you use. Get Arion ERP's 2-week free trial to improve your average inventory management plan.

​Software for inventory management increases profit.

Inventory management platforms is somewhat like the stock market because it can be risky. You risk losing everything if you invest in risky ventures, such as new product lines and niche items.

Inventory management software can reduce risk and help you manage costs. This will ultimately lead to a better bottom line for your company.

​Storage costs can be reduced.

Every cost of inventory management software worth its salt must include basic economic order quantity calculations. The EOQ allows you to determine the most cost-effective way to order new products. It compares the costs of stocking your products to ordering them.

Software that manages inventory costs can automatically do this so you can reduce warehousing costs and save money.

​Minimize losses

Your business can lose money if your products don't sell. You've already spent the money necessary to create the items but cannot recoup the capital by selling them. This risk can be minimized by using inventory management software that includes forecasting. This inventory management software checks your inventory levels and ensures that your business has proper inventory management solution.

Forecasting is a process that tracks the units you have sold and estimates the number you will sell in the future. It also involves inventory tracking control. Forecasting can be inaccurate even with an automated, computer-generated tool.

However, inventory management software is still more accurate than manually crunching the numbers.

Your point-of-sale system can integrate inventory management software to automatically update your stock numbers. This allows you to make more accurate projections and lower your risk of overinvesting in products that don't sell. Your software can also calculate how many units you need and suggest the best time to place an order. This will ensure that you don't spend too much on warehouse storage but still have enough stock to meet customer demand.

​Sell more products

For a moment, imagine that you are trying to purchase a brown leather wallet for your birthday. The store where you expected to carry the item turns out not to have any brown leather wallets on hand. You may decide to leave and buy another item, depending on your situation. If you really want to get your friend a brown leather wallet, you can leave the store and go shopping until you find it.

Your customers may be the same. Your customers won't come back to your store if you don't have enough products in stock. They'll just shop elsewhere. If this happens often, customers may not return to your store. A single sale can cost thousands in lost sales potential, so make sure you have enough stock to satisfy customer demand.

Inventory management software makes it easier to ensure that you have the right products at the right time so that you can meet customer demand. This not only helps you sell more right now but also ensures customer loyalty, which will allow you to sell more products in the future.

Get a Free Estimation or Talk to Our Business Manager!

​Bottom line

Your inventory management has a huge impact on your bottom line. An inventory management software solution can reduce errors in inventory management. This will make your business more efficient, profitable, and better able to serve customers.

  • Prev Post

    ☕ How is ERP System Beneficial to the Users in an Or...

  • Next Post

    ☕ ERP for Distributors: How to Choose the Best One