Starting with a summary of inventory, then continuing to the dos and don’ts. Start managing your inventory like a pro today!
The vital part of a business that helps to succeed is inventory management. The word inventory was developed in the early 15th century with the definition “list of goods.” The success of a business lies in how this list of goods is handled. Every business has a supply chain that consists of inventory. Inventory management is a part of this chain and the purpose is to have the right products in the correct quantity at the right time. If done systematically, it helps the business to cut down losses by reducing excess goods while maximizing profits. The best of us fails at keeping track of our sticks, and that is okay. We are humans after all. In this day and age, there are many easy and ingenious ways to keep track of our stocks, you can check trackahaul.com to learn more.
This article breaks down the basic involvement of inventory management in a business. The easiest way to get started is from the beginning by having a general idea. There are mainly three identified inventories. Raw materials are basic materials from which a product is made and are usually bought from outside. Another one is called, work-in-progress, these are unfinished goods that are added to the inventory and developed. And lastly finished goods, these are products completed and ready to sell. Many of us are involved in the finished goods stage. There are other types as well. It depends on which inventory you are dealing with. It could very well be your everyday inventory.
Create a list of your inventory’s top priorities.
Organizing your inventory according to priority will help to figure out which products you need to order more regularly, as well as the ones critical to your company but may be more expensive and take longer to ship. Experts recommend categorizing the inventory into three categories: A, B, and C. The A category consists of higher-ticket pieces that you would need in less quantity. Low-cost products with a high turnover rate fall into the C group. The B category consists of products that are reasonably priced and go out the door slower than items in the C category but faster than A.
What small business should do 101
Accurate predictions are important, calculations of sales will depend on past sales, new market trends predicted growth and the economy. If the business holds perishable stocks such as food or flowers then they should be sold in the same chronological order as they were purchased by the consumers. Holding stocks wastes space in inventory and capital, so a business should identify these unsold stocks and apply a strategy by offering discounts for the products which helps to reduce loss. Do a physical count of your stocks annually if products are moving too fast and having issues with stocking, this may help to fix the problem. Create a system that tracks your stock in real-time. Proper examination of the products before it’s up for sale to check for quality errors. Getting a professional stock controller that handles all the orders, deliveries, and ensures that everything going out and coming in matches the produced and ordered list, a practice followed by big companies. Small businesses may fall into fraud or be victims of phishing. It is important to keep in mind that as well, and take proper caution.
Why inventory management is vital
It will be impossible for the company to manage if there are inadequate supplies to satisfy unexpected increases in demand. Fresh fruit and vegetables for instance, may be kept in an acceptable stock rotation scheme if they are out of stock and not in demand. Stock disposal can occur as a result of improper processing and distribution measures, resulting in a loss in the market. Excessive storage accumulation can result in increased inventory and resources that are tied up. Poor management of the stock-purchasing function can result in late deliveries, low discounts from suppliers, or even too large of a delivery for the warehouse to cope with
Consequences of not holding enough stocks
There will be a loss of sales if there is a delay in supply. Delay in payment and loss of goodwill from the customer if orders are not delivered in the given time. The cost of transportation increased to complete the “rush” orders. Disruption of the production process of the firm. Scheduling of the production becomes inefficient. Purchasing a small volume of supplies at high prices to meet shortages of supply. It is therefore important to have stocks, but you need to know how much. Large quantities may lead to losses. The best way to keep track of business transactions is using multiple software programs that are available and experts on inventory management. However, this also requires strong cyber security. We do not want our business transactions or inventory information to get stolen or hacked.
Purpose of holding stocks
To meet production requirements, stocks of raw materials are kept in the warehouse, so they can be used when needed. To continue the production process and to allow greater flexibility and utilization of time and machinery stock of “work-in-progress” is maintained. Stocks of finished goods should be readily available so that they can meet customer’s demands on time.
Invest in inventory management software
It’s possible to manage the first few items on this list manually, using spreadsheets and notebooks, if your company is small enough. However, as your company expands, you’ll need to spend more time on inventory than on business, or risk having too much stock. Both of these tasks are made simpler by good inventory management tools. Before you choose a software solution, make sure you know what you’re looking for, that it has the analytics you need, and is simple to use.
Starting from FIFO methods to contingency plans, whatever way we start, we must start somewhere since inventory is a company’s most valuable asset. It is vital to safeguard and nurture it in the right direction to save and make money. Inventory managers can develop and maintain an effective inventory management system that saves time and money by paying careful attention to the key factors listed above. Learn and choose the best inventory management techniques for your company and start using them.