The most crucial aspect of any manufacturing unit is inventory management. Typically inventory management always involves the process of tracking the total available stock and ensuring that appropriate stock levels are always maintained.
The role of an efficient inventory management system is to equip an organization to respond to the changing market demands instantly and save the company from running out of stock or holding dead stock.
Thus, having a strategic inventory management system can boost the overall profit of an organization. Although the strategies would widely differ from company to company, yet few popular strategies can be applied by all to improve the overall operational efficiency of your manufacturing unit.
Let’s look at some tried and tested strategies:
Automate Your Inventory Management Process
Even if you are a small company with very few SKUs, you cannot rely on manual procedures. The manual process is tedious, subject to human errors, and extremely time-consuming.
Today as businesses have started to go online, the need for a more accurate and quick method is the need of the hour.
Automation is the buzz word in the inventory management field. An automated inventory management system can take care of your daily operational processes with accuracy and precision. Moreover, it allows employees to track and report processes in real-time, which means that information is updated live, and any emergency can be immediately addressed.
The latest automated inventory management systems can incorporate barcodes, that makes warehouse management easy and efficient.
ABC analysis is, by far, the most recommended method in the inventory management field. This method involves sorting the inventory into three major categories, based on the flow of products and materials as per their demand and the cost involved in holding them.
A includes fast-moving items, i.e., products and materials that are high on demand and cost very little to store.
B includes moderately selling items. Although they sell regularly, the cost involved in storing them is more than category A items.
C includes items that are slow-moving and are taking up most of your inventory cost and space.
The ABC analysis of inventory helps you understand your products better and thus put them in different baskets and decide when and what products should be knocked out of your inventory list. Based on this analysis, you can further plan your marketing strategy.
This is one of the essential functions of inventory management. The ability to forecast the future demand for your products is the winning strategy. Based on these predictions, you can make calculated stock ordering decisions. For instance, do you generally get a higher number of orders during the holiday season, what kind of orders do you get during this time, which are the products that were previously ordered in bulk or do you attract a higher number of buyers by offering discounts.
Decisions based on such detailed analysis will also result in profits. Forecasting should be both qualitative and quantitative, i.e., what quality products are to be ordered and in what quantity.
Apart from the above to make forecasting easy, you can use the following methods:
- Generate a recurring monthly procedure
- Decide what you need to measure and at what interval
- Collate and integrate all the data into one system
- Maintain real-time, up-to-date data
- Use the inventory managing software and tools and
- Choose software that can handle your inventory management and streamline the processes in a more organized and data-driven methodology. The inventory management software for QuickBooks is one such tool that can help you to optimize your inventory and manage your raw materials and finished products in real-time.
The Bottom Line
An efficient inventory management strategy can reduce your operational cost, increase sales, and improve your customer service. The above four approaches are used universally and are sure to bring assured and positive change to your business.