Introduction to effective inventory management
Especially today, manufacturers, wholesalers and retail businesses from several different industries share several standard business practices, with inventory management at the top of the list.
An efficient, capable inventory management system can distinguish between struggle and success. Any boost to the efficiency of managing your inventory can result in a significant return on investment. To drive the effectiveness of your inventory management, especially when if you’re just getting started, it helps to pay attention to 10 popular techniques:
1.Fine-tune your forecasting Accurate forecasting is a must unless you want to either tie up precious capital in product stuck on warehouse shelves or be unable to meet your customers’ orders.
2.Identify low-turn stock Have a flexible ordering approach that, combined with accurate forecasting, lets to adjust inventory based on customer priorities.
3.Regularly audit your inventory Knowing—not guessing—what you have at any given moment lets you adjust ordering to ensure a balanced inventory.
4.Track stock levels You want to track all inventory from the moment you purchase raw materials or components to when you deliver finished goods to your customer’s door.
5.Keep track of your equipment Especially in a production plant – Knowing what you have, how quickly it wears and when to schedule repairs for optimal life ensures uninterrupted production runs.
6.Verify Quality Ensure all items in your inventory meet your quality control standards, ideally from the moment they arrive.
7.Categorize inventory based on customers needs Ensure you have the most sought-after products in stock at all times, working your way down the line to the least popular products.
8.Consider drop shipping This is much quicker especially for any items you don’t make yourself, especially when it becomes part of your product. An example is a Siemens ® controller for industrial machinery.
9.Rotate your stockTurn your stock so the oldest items are sold first This is especially true for pharmaceutical products with comparatively short shelf lives.
10. Use good inventory management software A viable program that meshes with your financial and sales software helps keep everyone informed, making for happier customers.
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Figure 1:Common inventory management challenges
Common Inventory Management Challenges
Among the most common inventory management challenges that can affect a number of different businesses are the following:
- Inconsistent tracking Working with older software that relies on manual data entry opens a company to data entry errors. Mistakes are bound to happen when different departments use different spreadsheets to input the same information.
- Inaccurate data Companies need to know how much of everything they have on hand and in the pipeline. Without accurate information, you won’t be able to track your production. This can be a massive problem if you’re still manually entering data.
- Order management Manufacturers often live on the edge of logistics, struggling to make sure deliveries are going out just in time – right before their customers need them.
- Juggling a complex supply chain Manufacturers need alternate ways of obtaining raw materials and shipping finished products. For example, your primary port is running behind because dock workers are sick. How do you get what you need when you need it?
- Communications and planning Intercompany communication is critical, especially in a world where companies often have business units in different countries, keeping everyone focused on the same task can be difficult.
- Robust competition In every industry, competition is ready and willing to grab your customers when you make a mistake or find yourself unable to deliver on time and within budget.
These are a few examples of the challenges faced by modern manufacturers. Thankfully, the good news is that modern ERP solutions can be a huge help when it comes to addressing these issues.
Inventory Management Software As a Solution
Several inventory managements programs available on the market today that focus not only on addressing these challenges, but also by identifying potential issues before they can impact your operations. Some of the best solutions available, like Microsoft Dynamics 365 Supply Chain Management, can seamlessly integrate with your existing software, reducing data silos, allowing different departments to share more information. Instead of requiring three departments to input the same information into a database, each group is able to provide material unique to their specialty.
Effective inventory management programs like Microsoft can print barcodes and QR labels. When these codes are scanned with a hand-held reader or cellphone, users can be rewarded with a wealth of information. The most critical data to track are precisely how much of any product you have, where it’s being stored, and what it will be used for.
For example, you need to produce 20,000 doses of a Covid-19 treatment. Your customer needs them yesterday but will settle for next week. Do you have enough raw materials on hand to meet your customer’s deadline? If not, what can you do to obtain what you need?
Using this information wisely lets management develop complex plans, like the ability to track everything from small lots to pallet loads. A company can learn by checking an item’s progress at different points—its arrival at the warehouse, use in production, loading onto a truck or ship, and delivery to the customer. By examining reports, you can identify potential delays or roadblocks and find ways to speed up delivery.
Supply chain management software on a secure cloud computing platform like Microsoft’s Azure let’s you communicate securely and safely with other researchers, salespeople and vendors. With Azure, you’ll know that your intellectual property and contracts are safe from competitors.
Boost Decision Accuracy with Power BI
With today’s supply chains – seemingly constantly in a state of upheaval – effective inventory management that goes beyond tracking stock on hand is critical to operations. Effectively managing your inventory and raw materials ensures you’ll have the materials you need when you need them. It means having more than one source of supplies and materials. It also means constantly checking with vendors to ensure you have the goods to meet your own delivery deadlines. This is where an integrated business intelligence solution comes into play.
Microsoft Power BI let’s you connect to hundreds of data sources, preparing reports you can easily share. You can confidently deliver interactive messages to customers using information from inside and outside your company. Inventory planners can be warned of potential shortages in time to find alternate supplies. Salespeople can be told of possible delivery delays caused by outside forces, giving them time to ask the customer if they want to use a different shipping method.
Accurate business intelligence at your fingertips puts you ahead of competitors stuck using their “tried and true” methods that are becoming increasingly worthless every day.
Effective inventory management comes down to data: knowing what you have and where it is.
A modern inventory control system that supports labels and barcodes lets you track raw materials, work-in-progress and finished goods simultaneously, with high accuracy.
An inventory system with business intelligence helps you find faster and alternate ways of obtaining raw materials and pre-made products, mainly when shipping delays occur. That information can help you get your products to your customers when needed, balancing everyone’s inventory.