A Closer Look At Inventory Management
Why is inventory management so critical? Inventory management is about the sourcing, storing, and selling of inventory. This includes the raw materials shipped into your stockroom as well as the finished products themselves. It may seem simple at first, but the larger your organization is, the more complicated inventory management can become.
A company’s specific inventory management definition will depend on the industry and what products are sold, and the raw materials required to produce them. Inventory management typically embraces everything from tracking purchases you make from suppliers or producers, maintaining accurate stocking information, and determining how much product you sell (and at what price). The goal of inventory management is to have the most efficient amount of stock in the right place, at the right time, for the right price for your business.
Using an inventory management system will enhance your business in several ways. It can help you monitor end-to-end production, analyze lead times, forecast demand based on seasonality and other factors, and produce reports that can improve your bottom-line results.
Inventory accuracy involves more than simply counting how many materials you have on hand, it affects the organizations’ ability to fulfill orders. Without it, you may lose counted materials, have the wrong number of finished products on hand. This makes it that much easier to have an order canceled due to a delay. Inventory management issues are estimated to cost businesses $1.1 trillion every year.
Perhaps even more crucial, sending a customer the wrong product hurts your company’s reputation. Bad online reviews can affect future orders and influence potential customers. For small and large businesses alike, this can create a snowball effect of unsatisfied customers. From this issue, you might be forced to take on the additional expense of shipping the correct product as well as take the time of retrieving the wrongly shipped one. That is only one example of the importance of inventory accuracy and of having a process that works for your organization.
For more information and tips on inventory management take a look at the infographic below.
Infographic created by WSI