The procurement of assets and inventory includes several tasks and most importantly they are interrelated. In these tasks, one of the most complicated tasks is supply chain management.
According to Investopedia, supply chain management is the management of the flow of goods and services and includes all processes that transform raw materials into final products. It involves the active streamlining of a business’s supply-side activities to maximize customer value and gain a competitive advantage in the marketplace. Therefore, inventory management is important for successful competitive business.
What is inventory management?
Inventory management is maintaining the right level of stock at the required place at the right cost. It is a systematic approach for ordering, storing, and selling inventory. It is used in raw materials and finished goods. Inventory management is essential for almost all major industries such as retail, shipping, hotel, eCommerce, manufacturing, logistics, hospital, etc.
Why maintaining the right inventory level is important for business?
Maintaining the right level of inventory is very important because if it is not done properly it can make a huge problem for your business. If not managed correctly you will be either have out of stock issue or overstock issue. It can greatly affect your business bottom line.
According to the CNBC, out-of-stocks accounted for $634.1 billion in lost retail sales for the year ended in the spring — 39 percent higher than in 2012. Likewise, overstocks contributed $471.9 billion in lost revenues, up 30 percent from three years prior. This is why maintaining the right level of inventory is important. It should neither be too much nor too less.
Out of stock is the loss of business whereas overstock can be a major issue. For example, in the winter season, retailer-bought jackets, boots & clothes but they were not sold in too much quantity as retailer thought. As a result, stock wasted, no return on investment, in fact, loss.
What is the process of maintaining the right inventory level?
The process for maintaining the right level of inventory is as follow:
Complete inventory list –
There should be a complete inventory list so that you know all the inventories you have in which place. Therefore, it is important to maintain a list of inventories such as consumables or spare parts. It empowers you to know stock available at all locations in a single view. It can assist you in making a balance between stock levels & manage stock from one location to another.
Inventory alert & notification –
Alert & notification is a powerful feature when you want to maintain the right level of stock. It is very critical for your business as it provides real-time updates. The inventory is considered an asset but if not managed correctly, there can be several issues such as stock inconsistency. Therefore, it is important to manage inventory effectively.
Automatic inventory alert and notification can notify the team via SMS and mail for maintaining perfect stock levels. Alert and notification feature can be used for the purpose of:
- Re-order level
- Wrong inventory allocation
- Overstocking inventory
The advantages of inventory alert and notifications are optimized inventory levels and minimizing stock or inventory wastage.
Re-order level –
A shortage of inventory can hurt your business. Hence, it is important to maintain inventory at the right level. But the question is how you will know when stock is low or overstock, which storehouse needs stock refilling. Inventory management software allows you to add, move, or draw inventory from one location to another. It provides complete detail such as warehouse location with stock.
Moreover, when a specific warehouse of yours has low stock then it will notify the responsible person for refilling stock. Re-ordering feature efficiently handles stock refiling issue. It is one of the most useful features of the manufacturing industry. According to this feature, the minimum stock level is defined & when the stock reaches that level it alerts the responsible person, and then the refilling stock process is started. Therefore, this feature can help you in keeping your inventory optimized. Most importantly, now you don’t have to remember about refilling stock manually.
Inventory reports –
Inventory reports and details can provide you with lots of detail. These details can be beneficial for your business. For example, which location needs more stock or which location can work with less stock and so on. Inventory reports can be shared with relevant employees & departments with precise and real-time information. It can assist you in improving the right level for maintaining stock as per the location. Moreover, it can estimate the number of future inventory product needs.
Inventory tracking –
Keeping track of inventory is tricky. Knowing when to reorder & in how much quantity, it may seem a simple job. However, it is much more complicated. But with asset management software, within just a few clicks you can get all the information. This information is really effective in proper inventory management. Without inventory tracking, you will not be able to re-order stock & stock monitoring.
Can requisition management help in inventory management
Yes, requisition management can help in inventory management! Requisition management is the procedure that includes creating, processing, authorizing, and tracking of purchase requests within a company.
Employees generate the required inventory purchase request (PR) after that manager checks, if it is essential or not, and if found essential then approve it as per the budget. After that purchase order (PO) is created and then the product arrives as per the purchase order. At last GRN (good receive note) is sent to the seller.
Inventory is very crucial for business success. When an accurate inventory management system is used it results in discovering high selling products and low selling products as well. Most importantly it is helpful in finding the perfect level of stock. Because we know gathering too much stock is dangerous for business and out of stock will also stop your business growth. One must understand that a “one size fits all” strategy does not work in inventory management & every business has a different requirement.