8 Effective Inventory Management Techniques for 2021
Inventory is a crucial aspect of a business that involves purchasing, producing, and selling goods. It is essential to regulate and keep a check on the inventory for a profitable business experience. Both small-scale and large-scale companies can profit from keeping a check on the inventory. Inventory control software helps in growing businesses by focusing on stored items for production.
What is inventory management?
Inventory management is a technique by which businesses can keep track of the inwards and outwards stock-flow in their warehouses. It lets the companies plan their sales and purchase according to the inventory stock quantities. It is a systematized approach to manage raw materials, tools, finished goods, and unfinished goods in the inventory.
How does inventory management work?
Inventory management keeps a check on the stocks when it moves from the suppliers to the company warehouses and finally to the customers. It ensures efficient use of the items and helps plan future sales. It also helps in controlling the demand and supply chain of the business. A good inventory control software helps keep a record of the inventory systematically. It tracks the availability of the stock for its optimal usage.
Why is inventory management important?
Manual stock accounting can be stressful and can create confusion. Inventory management is less time-consuming and helps maintain a smooth flow of work without any misinterpretations. It improves consistency and increases customer satisfaction. It automates the workflow and provides detailed reports of the stocks such that the company is not out of stock or overstocked. Software companies like Ankpal offer the best inventory management software that helps your company grow with reliable services.
Inventory is one of the most valuable and largest assets for businesses. Inventory management software provides financial aid to the companies as it keeps a check on the cost of buying, producing, maintaining, and selling the goods during the accounting period. It also manages to identify and track the expired products, and the items returned to the inventory. It enhances value management and reduces the chances of misinterpreting item quantity.
Common inventory management techniques for 2021
It is vital to track the stocks for the smooth functioning of your business. Many popular innovative techniques of inventory management can improve the flow of capital and regulate company sales. Some of the methods are listed below.
- Just-in-time (JIT) inventory
JIT inventory, as the name suggests, means keeping only that much stock in the storage as is needed for production.
- ABC inventory analysis
This technique divides the inventory items into value-based categories A, B, and C that makes it easier to track them.
In this technique, the companies outsource the products from a third party. The requirement of the warehouse gets reduced as they don't take it from their inventory.
- Lean manufacturing
This technique aims to reduce the waste during manufacturing and increase the cost accounting to the customer needs.
- Batch tracking
Batch tracking is a technique used to keep a check on the set of goods produced together. It gives a prompt about the expiration of a particular batch of products, allowing businesses to avoid losses and plan sales.
- Safety stock inventory
In this technique, the extra stock gets purchased as a safety measure to cope with the misinterpreted forecast or change in demand.
- Economic order quantity (EOQ)
EOQ technique uses a formula to ensure the purchase of the right number of stocks required for the productions.
- Minimum order quantity (MOQ)
MOQ is the calculated minimum quantity of inventory stock required to purchase at one time for producing an item.
Five key stages of inventory management
- Purchasing: Raw materials get purchased for production.
- Production: Manufacturing of final products.
- Holding stock: Storing raw materials and finished goods.
- Sales: Selling the products in exchange for payments.
- Reporting: Recording the profits and quantity sold.
Efficient inventory management techniques adopted by businesses help them track their unfinished and finished items. The best inventory management software helps to control the expenses, which can increase the profit margin and leave businesses with enough capital to expand their business. Furthermore, with an efficient inventory system, enterprises can also meet client deadlines and make their customers happy with their service.