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If your business carries stock, it is extremely likely that you are familiar with the concept of inventory management. It is a scientific method used to oversee and control all aspects of stock control including ordering, storage and the factors relating to production and quantities required for sale.
The inventory of a business is one of its main resources and is instrumental in controlling cash-flow and hostage cash, so it’s imperative that the processes are carried out correctly and accurately.
The key elements of inventory management are as follows:
- Maintaining enough stock – your stock should be maintained at a reasonable enough level to provide your customers with the products that they need while not spending too long in storage. This will involve an element of prediction based on previous year’s sales or if you’re a startup, guidance from an expert. Stock maintenance must factor in stock ordering time spans as well as materials required.
- Avoiding excess stock – excess stock is effectively redundant cash. It costs money to store inventory so if you have too much your overheads increase. Personal property tax can also be added onto unsold stock which is another cost you can effectively avoid. The excess inventory also takes the place of popular stock items which means you will have to reduce those popular lines due to lack of storage space.
- Cash-flow - effective cash-flow is key in any small business and binding cash up in stock is a critical error that should be avoided at all costs. If you have excess stock, the natural reaction is to reduce its price to sell it and make room for new inventory, however, this reduces the return on investment and thus reduces your profit.
- Tracking inventory – a successful inventory tracking system can advise you on your stock levels, current order status, and sales history.
Here are some key components involved in structuring a successful Inventory Management System:
- Barcodes – items with barcodes can be traced as they’re coming into the warehouse and tracked as they’re going out. This allows for automatic reporting on when stock needs to be replaced or if too much stock is being held.
- Software – Inventory software can provide accurate data and scientific information based on actual and predicted sales. It can offer solutions based on current trends.
- Portable data terminals – portable data terminals can be carried in the hand and have the ability to read barcodes. This will help to identify when the stock is leaving a warehouse or storage facility without the use of a computerized till.
While manual stock control is an option, it is limited in its potential. Counting manual items provides room for error and calculations are not specific. A scientific inventory management system can calculate the ideal stock ordering and holding facility for your organization to ensure that cash spent on holding the stock is kept to a minimum and can be spent where it is better directed, towards operations.
If you are looking to implement an inventory management system, engaging with an IMS professional found on Freelancer.com will offer you a positive outcome. They will be able to implement processes and strategies to ensure that your inventory levels are maintained at just the right level to increase your profit and reduce overheads caused by holding too much stock.
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