Inventory management involves controlling the amount of stock on the shelves, maintaining good stock storage, and making purchases. The inventory management technique involved in your business will depend on the type of products that you sell.
Inventory Management
You realize that as your business grows, it becomes harder to manage your inventory. Inventory management is more than reordering and monitoring your stock. Here are other reasons why inventory management is important for your business.
Accurate Orders
Inventory management allows you to have an exact number of your stock amount. This way, when placing orders, you can ask for a good number and avoid overstocking your warehouse.
Avoid Dead Stock
Inventory management allows you to know how much you have in the warehouse. The warehouse inventory will guide you in making the next orders. You can know how much you have and when you should make new orders. This creates an uninterruptible flow that reduces the chances of having dead stock.
Warehouse Organization
A disorganized warehouse may pose a challenge for recording your inventory. Inventory management allows you to get your warehouse in order and enable you to find high selling products fast. Thus, you can achieve order fulfillment and ensure customer satisfaction.
Save Time
Inventory management allows you to know how much stock you have when to reorder and what needs restocking. This way, you can make timely orders to avoid running out and also clear slow-moving stock. Keeping track of your products ensures that you don’t have to recount to confirm the data, thus saving time and effort. There are various approaches that business owners can take for inventory management. The management methodology applied depends on the type of business, size of the business, and products sold. Managing inventory becomes challenging as the business grows. Here are some inventory management techniques that you may use to simplify the whole process along with inventory forecasting.
Ind AS 2 Inventories
ABC Inventory Management
This approach involves the categorization of products according to their importance. A marks the most important products and C the least. This technique is based on the cost of the stock, stock value, and consumption rate. This method allows easy, effective resource allocation since the allocation is done on a prioritization basis. Also, it allows accurate inventory taking since each product is accounted for based on its category.
Just in Time
This inventory management technique allows businesses to reduce the volume of available stock. The inventory is purchased a few days before distribution. This technique helps businesses to cut down on warehouse costs by reducing the stock volume. JIT inventory management allows businesses to eliminate dead stock and prevent counting losses by improving cash flow.
Inventory Management Software
You can also use software to record the amount of stock in hand, give restocking alerts, and update the inventory after restocking. You can use cloud-based accounting software that will help in processing financial transactions and inventory management. The software will send alerts if items are running out and remind you to make orders. It will also aid in calculating the stock value and tracking orders, sales, and logistics. The software helps with the billing of the inventory and creates related documents. The software helps to eliminate human error from manual documentation and prevent running out of stock. Inventory management software enables tracking of items stored in different locations. The software works to produce accurate records used in making vital business decisions.
Cycle Counting
This technique involves taking small stock numbers on particular days without having to take a full stock count. Through cycle counting, you can determine your stock records’ accuracy by comparing the final count to what you have in stock. This technique saves time and money since you don’t have to conduct a full stock take.
Inventory Turnover Ratio
Customers can get what they want when requested and thus reduces the cost of stock storage. This inventory management process ensures that you take your stock without disrupting normal business operations. The inventory management technique employed will make or break your business. Consider a technique that works for your business and ensures that you keep your stock in check. Understand your supply chain and find a good way to monitor your stock based on the products being sold.
