“Minimize the inventory cost and maximize the ability to achieve customer experience by prompt delivery of goods is the main goal of Inventory Management!”
What is Inventory Management?
Inventory Management is one of the main components of supply chain management of an organization. It monitors and manages the product flow of the entire supply chain management system. It supervises the product flow from the supplier to the production unit, finished product to warehouses and the point of sale units.
The Major duty of Inventory Management is the detailed recording of the movement of new or returned products. The entry of new product to warehouse, the sale of a product from Point of sale and the incoming of return goods are recorded in detail by the Inventory Management.
How does the Inventory Management work?
- The inventory management is important for a business and it is a very complex process too.
- It bears many risks such as miscarriage, theft, spoilage, have conditions like – goods must be sold in time and goods must be insured, etc.
- An organization regardless of its size, maybe larger or small, the basic process of inventory management is the same. (i.e) raw materials or components entry in the stock area moved to the manufacturing unit and then again kept in the stock area as finished products ready for shipping or point of sale.
Basic Process of Inventory Management:
- Depends on the organization types, the inventory management process differs
- The inward of the products to the stock area will be in the form of finished products right from the starting stage when the organization is a wholesale distributor.
- In case, the organization is a manufacturer, the raw material or components are entered in the stock area, secondly moved to the production unit and finally come as finished products. The finished products are again kept in the stock area and then will be moved for prior shipment yard or directly shipped to the customer end.
- The inventory Management records the product flow from all stages with full data of product such as serial number, quantity, lot number, date of manufacturing, cost of the product, etc.,
Why Inventory Management is so important?
As the inventory of an organization is the most important asset, it should be carefully and efficiently managed.
The Main Goal of Inventory Management:
The main goal of inventory management is to minimize the inventory cost. To avoid keeping of expensive goods unnecessarily & invest in fixed assets like buildings used as warehouses and maximize the ability to achieve customer satisfaction – (i.e.) to provide goods as per customer desires at the desired time.
How does Inventory Management help the organization to achieve the goal?
- Inventory Management supports the organization of any size and it helps the organization to make main decisions – when to order, the amount to order or reorder, and the amount to produce or purchase of goods.
- It also supports the organization to do the analysis of future demands against the stock on hand and to know the minimum level stock.
- Depending on the industry type, inventory management uses different strategies. The stock of risky goods like oil & crackers is kept in limited quantities to avoid risks.
- The large inventory may lead to disposal and even to get destroyed. The overstocking of fast fashion dresses may lead to clearance sale and excess inventory of time-sensitive products such as diaries and calendars of the current year may lead to being destroyed next year.
- The need for festive and seasonal products and customer behavior is to be carefully analyzed while making purchases or production. To do this, inventory management is so important to make decisions and achieve the goal.
How does the inventory management software work?
- In earlier days, inventory Management software used spreadsheets to track the number of goods in inventory but later it expanded to higher levels with technical implementations. Now modern inventory Management software integrates with the accounting systems and ERP systems.
- It supports larger organizations to handle the multiple warehouses and SKUs (Stock Keeping Units) located in multiple locations effectively. It also supports the larger organization’s accounting system to deal with multiple currencies to value the goods of inventory accurately.
- In initial stages, the small and medium-sized organizations used Software As A Service (SAAS) type of inventory management software products. Larger organizations used customized design software products to meet their specific needs. But now in modern Ecosystem organizations are being moved to use cloud-based Inventory Management software products!
- To sustain in the modern ecosystem, visit us www.digiit.biz for best support in the inventory Management system.