Inventory Management Techniques 2021
As the business grows and expands, it is hard to keep track of inventories and locate them. Most businesses use documents like excel sheets to keep inventory data. Such methods are labour intensive and demand manual efforts, hence demand a lot of time. As the business grows, it should account for reliable factors like business products, selling methods, and business value or motto.
As the business scales, it is crucial to have efficient, effective, and creative inventory management techniques. Brands in today’s world have to sell to global customers through multiple channels and consistently bring in creativity in the highly competitive market. To make this easier, businesses tend to rely on advanced and reliable technologies like financial management technologies. Inventory management technologies are one of them.
What is an inventory management technique?
Inventory management means tracking stock right from the manufacturing stage to the delivery. There are many inventory management techniques that help brands function more efficiently without compromising visibility and control over the inventory. Using an inventory management system you can monitor and track inventory at any given time across the channels. This software offers you crucial insights into business and customer data.
Inventory management software automates and streamlines the inventory process due to its capabilities of integration with other software and business operations like accounting, sales, etc.
Now, let us explore a few inventory management techniques that can help in boosting efficiency and accuracy.
ABC Analysis
It also means Always Better Control Analysis. Here, inventories are divided into three categories namely: A, B, and C. A category inventories are high-priced and hence are closely controlled. These inventories might be lesser in number though. B category inventories are comparatively less expensive than category A inventories. These are moderately controlled. The C category inventories are even less expensive, and hence the control level is the minimum.
Economic Order Quantity Method
The technique is about deciding how much inventory should the business order at the point and when should the order be placed. Here, the business can reorder the inventory once it reaches the minimum level. This technique saves both the ordering and carrying costs.
Fast, Slow & Non-moving Method
This technique of inventory management is used to control obsolescence. It is a fact that not all the inventory items are sold or utilized in the same order. Some items are in frequent demand, while others are hardly in demand. This technique segregates inventories into fast-moving, slow-moving, and non-moving categories. Depending upon this, a new order is placed.
In this inventory management technique, the business keeps only that amount of inventory that it needs during the production process. As the business has no extra inventory to take care of, it saves storage cost. The business can place an order for replenishing goods. However, a little delay in placing an order for a new inventory can get you into an out-of-stock situation.
Material Requirements Planning Method
Here, the sales forecast plays an important role as the manufacturers place an order for the required inventory based on the forecast. This technique integrates data from multiple different business areas where inventories are required or dealt with. Based on this data and the market demand, the decision-makers of the business would order more inventories.
Minimum Safety Stocks
This is the minimum inventory level that the business maintains to reduce or eliminate the risk of the out-of-stock situation. Here, the new order is placed in advance of the current inventory being finished. The motto is to maintain the minimum inventory level as a safety.
VED Analysis
This is also called “Vital Essential and Desirable” analysis is done to control spare parts. Inventory spare parts which are highly expensive and vital for business demand higher-level inventory. Essential inventory spare parts are those which cannot stay absent as it may reduce the pace of the process of production. In the same way, the business can have desirable spare parts of the inventories at a minimum level.
Stock Auditing
Often, inventories are not labelled clearly and the staff has to suffer as it has to deal with different disparate systems to find those inventories. Stock auditing automates these tasks and helps in inventory management with no or least errors.
Inventory management plays an important role in every business. Effective inventory management can reduce multiple business costs and the logistics and supply chain management system of the business gets the required boost. Decision-makers can forecast the demand and place an order for the required inventories in advance. Businesses, hence use effective inventory management techniques to satisfy every customer demand at cost-effective rates consistently.
