Inventory management is the ‘best friend’ of business owners when talking about ordering of stocks because it is what helps track inventory starting from purchase to the sale of goods. Apart from that, it also ensures that there is always enough stock to meet your customers’ demands and it prevents you from surprise shortage by giving proper warning of time.
You can say that you have a good inventory management based on inventory turnover; it defines how often stock is sold in a period. Having more stock than sales is bad business. It leads to poor inventory turnover which means there will be unsold stock.
Inventory management is vital to a company because it is our constant reminder not to have too much or too little stock on hand. With its help, there will be a low chance of stock-outs and inaccurate records.
How it Works
Inventory management is there to make us understand stock levels and stock’s location in warehouses.
This software also monitors the journey of the products from the supplier, through the production process, up to the customer. While in the warehouse, it is in charge with tracking of stock receipt, picking, packing and shipping.
What are the challenges in Inventory Management?
The challenges that you will often encounter when managing your inventory are too much of unsold inventory, insufficient inventory to fulfill orders, and not being aware of the stocks you have in inventory and their whereabouts. Aside from that, you may also come across these obstacles:
Undesirable Process Results – A barrage of errors and delays will hit your operations if you are using outdated inventory management system and strategies.
Accuracy of Stock Details – Having inaccurate stock details is like putting yourself in complete darkness where you will have no idea when to refill stock or which stock performs well.
Unpredictability of Customer Demand – Without a system to track trends, there is no way you will be able to cope with the constant change of your customer’s tastes and needs. This means you will always be behind in terms of knowing their preferences change.
Conflicts on Warehouse Space – A lot of precious time, effort and resources are wasted when products become difficult to locate. But this will be prevented if you have fully understood inventory management and you have the right tools that will help you manage your warehouses.
What are its Benefits?
In general, inventory management raises profits by ensuring the fulfillment of incoming or open orders. Here are its other benefits:
Improved Cash Flow – Having effective inventory management pushes the continuous flow of cash through the business by helping you know what inventory sells thus; you do not have to spend money on goods that will not bring you revenue.
Customer Satisfaction – It does not only leave customers satisfied but it also inspires them to be loyal because you are able to give them the items they desire without waiting.
Cost Efficiency – Through it, you will better understand stock trends. This means you will be in full control of the supplies you have and where they are located, therefore, you will be better able at using the stock you have. This also allows you to control the number of stocks in every store or warehouse enabling you to fulfill orders because you can pull stocks from anywhere.