Effective inventory management is a crucial aspect of supply chain management, as it reduces the total expenditure of an organisation. Withholding excess finished products lead to increased warehousing and transportation costs, and often run the risk of damage, particularly in case of perishable products.
Compiling reduced stock, on the other hand, may cause companies to miss out on business opportunities, which would have otherwise led to substantial profit generation.
Upon knowing what is inventory management and its relative importance, entrepreneurs can undertake numerous steps to increase their efficiency through this process.
- Keep track of sales records in the past, which reflect the pattern of aggregate demand of a finished product. Businesses can maintain high inventory stock during times of high estimated demand while reducing such stock in times of lower sales.
- Use inventory management software to increase the accuracy level.
- Know what is inventory check, and undertake the same periodically. Full yearly checks, cyclical counting and spot checking can be undertaken to maximise the accuracy of such stock management.
- Categories all manufactured products into A-B-C category to increase efficiency.
- Category A items yield high revenue for a company and thereby should possess a high percentage of total inventory.
- Category B goods have medium consumption value.
- Category C, which is associated with lower revenue but high sales volume, should be adjusted for optimal management accordingly.
- Set par levels to identify the total sales volume and time taken to restock all products. This would lead to the reduced time lapse between sales and restocking existing inventory, ensuring businesses do not miss out on any sales opportunity.
All businesses should know these pointers about inventory management to maximise accuracy through supply chain techniques.
Additionally, companies can avail business loans to finance excess inventory production, thereby allowing them to benefit from market fluctuations easily.
