The process of organizing and controlling stock along the supply chain is known as an inventory management system. Inventory management aims at reducing the cost of holding inventory while maintaining stable stock levels and accelerating the delivery of goods to customers. A successful retail business is built on effective inventory management software. Uncertain of where to start with inventory management? This guide will walk you through the best inventory management system, types, strategies, and advice for controlling stock levels and satisfying your customers.
What is Stock Inventory Management?
Inventory management aids businesses in determining which stock to order when and in what quantities. Inventory is tracked from product acquisition to sale. To guarantee there is always adequate inventory to fulfill client orders and proper warning of a shortfall, the technique recognizes trends and reacts to them.
Inventory turns into revenue after it is sold. Inventory ties up cash before it is sold while being listed as an asset on the balance sheet. As a result, having too much stock is expensive and lowers cash flow.
Inventory turnover is one metric for a successful stock inventory management system. Inventory turnover is a metric used in accounting to determine how frequently stock is sold over time. A company doesn’t want to have more inventory than sales. Deadstock, or unsold stock, can result from a lack of inventory turnover.
Why is Stock Inventory Management Important?
Because it helps to ensure that there is rarely too much or too little product on hand, inventory management is essential to a company’s health because it lowers the danger of stockouts and inaccurate records.
To comply with Securities and Exchange Commission (SEC) standards and the Sarbanes-Oxley (SOX) Act, public corporations must keep track of their inventory. To demonstrate compliance, businesses must document their management procedures.
Stock Inventory Management System Benefits
The two primary advantages of using a stock inventory management system are that it increases profitability and guarantees that you can completely open incoming orders. In addition, stock inventory management software:
- Saving Money: By understanding stock trends, you may better utilize the stock you already have by seeing how much and where you have it in stock. Because you can fill orders from anywhere, you may keep less inventory at each location (store, warehouse). This lowers the cost of holding inventory and reduces the amount of inventory that is unsold before it becomes obsolete.
- Enhances Cash Flow: With effective inventory management, money is always flowing through the company because it is spent on inventory that customers buy.
- Customer Satisfaction: Ensuring that clients receive the products they desire promptly is one way to cultivate devoted patrons.
Challenges in Stock Inventory Management
Having too much inventory and being unable to sell it, not having enough inventory to complete orders, and not knowing what items you have in inventory and where they are placed are the main issues of inventory management software. Other challenges include:
- Obtaining Accurate Stock Information: Without accurate stock information, you can’t determine when to restock or which goods sell well.
- Poor Processes: Outdated or manual processes can slow down operations and make work more prone to error.
- Changing Customer Demand: Customer demand is continuously changing, as are their preferences and needs. How will you be able to determine when and why their preferences change if your system is unable to observe trends?
- Using Warehouse Space Effectively: If similar products are difficult to find, staff will lose time. Getting inventory management right can help solve this problem.
The 5-Step Stock Inventory Management Process
It’s crucial to make sure you have the fundamental processes covered before you can optimize your inventory management process. Five crucial steps that are necessary for any inventory management process are outlined below:
#1. Receiving and examining the goods
Receiving your order from the supplier is the first stage in the inventory management procedure. For the next phases to go as smoothly as possible, it is essential to get this section right. When the order is delivered, the first thing that should be done is to inspect the goods. Making sure the amount, product, and serial codes are all accurate is crucial. Additionally, you should make sure that all products are in good shape and that handling situations, such as temperature, are appropriate for perishables.
#2. Sort and store the goods.
The products must be properly stored in the warehouse and entered into your leave management system after they have undergone inspection. Being deliberate about product storage at this point is a smart idea. Techniques for categorizing products in a warehouse using SKUs and product types can be useful. Additionally, it’s critical to keep best-selling items close at hand by keeping them in the most convenient storage locations.
#3. Accept the client’s order
Taking customer orders is the next phase in the inventory management process. A point of sale (POS) system will normally be used to handle the orders and take payments. The warehouse employees will be able to examine the order information thanks to the POS system’s inventory management feature, which is either built-in or connected to an inventory management program.
#4. Package and ship the order
The next step after a consumer places an order is to precisely and quickly complete the packaging and dispatch their order. Finding and choosing the products in the warehouse should be quite simple if the second phase of the process was optimized. When packing a product, it’s crucial to take the consumer experience, durability, and sustainability into account.
#5. Reorder new stock
It is essential to check that the number of goods and the timing of new orders are accurate while replenishing your stock. Utilizing the reorder point method will help you reduce the likelihood of stockouts and deadstock, two issues that have a detrimental effect on your bottom line. Reordering is automated by some inventory management systems, which saves time and eliminates mistakes due to human error.
Tip to Optimize Your Inventory Management System
We’ll look at some strategies to optimize your inventory management system after talking about the five processes in each inventory management process. There are various strategies you may use to effectively manage your stock, whether your goals are to impress consumers, make money, or both. Just a few of them are as follows:
#1. Keep planning
The work of perfecting inventory control and management never ends. You must continuously track results, keep an eye on inventory levels, and look into any problems that may occur. You can then adjust your management plans in light of this data.
#2. Prioritize essential items first
The task of managing your entire inventory at once is onerous. Decide on the important stock first, then focus on improving the process around them. This likely entails focusing on top sellers as well as goods that will be the focus of subsequent marketing initiatives. According to data from 2020, stockout rates for top-selling products often range between 8% and 12%, thus this is undoubtedly a topic worth focusing on.
#3. Engage all parties.
Putting together a team with a variety of skill sets is crucial if you want to get your inventory management done correctly. You must first assemble a core group of experts in mathematical modeling. But you should cultivate a culture that makes sure they have significant interactions with CEOs who aren’t in math. Additionally, you must involve employees from all phases of the inventory management process, from floor pickers to warehouse managers. It makes sense to solicit suggestions from the customer support team as well.
#4. Adapt your strategy to your business model.
When it comes to inventory management and stock monitoring, there is no one size fits all approach. Depending on its size, delivery options, and location, every brand has specific needs.
#5. Pick the appropriate tools.
It’s crucial to pick software and tools that can grow and adapt to your company. This is typically provided through cloud-based inventory management software. They are unaffected by local technological problems or power outages. Choose one that tracks the data you require to make informed decisions about inventory planning and interfaces with the rest of your eCommerce stack.
Types of Inventory Management
As there are several business types, there are numerous varieties of inventory management. There isn’t one inventory management system strategy that works for all organizations, so it’s crucial to learn as much as you can about the various types of inventory management system strategies that are accessible to you so you can choose the one that’s most effective for your firm. These types of inventory management systems are listed.
#1. Retail inventory management
For retailers, controlling inventory means keeping track of the goods you want to sell to customers. As a retailer, your major objective is to make sure you have adequate inventory to satisfy client demand and orders. However, since it costs money to store products, you also want to be careful not to overstock your warehouse.
#2. Multi-location inventory management
With several storefronts, warehouses, or sales channels to manage, multi-location inventory management increases complexity. To make sure you have enough stock wherever you sell, this kind of inventory management includes monitoring at the location level in addition to a comprehensive view of all your goods.
Inventory Management Techniques
Inventory management employs several strategies, while each business may favor some over others. Always keep an eye out for what suits you the best.
#1. Bulk shipments
Bulk shipment has traditionally been regarded as the most affordable method of purchasing items. It is perfect for a company that consistently experiences significant customer demand. Additionally, bulk shipping offers the best chance for financial success because the goods are ready for sale. With bulk shipments, you have reduced the number of trips made for shipping, which has led to a decrease in the cost of shipping.
#2. ABC inventory control
A management method for setting priorities and keeping track of inventory is the ABC inventory system (A = high value, B = medium value, C = low value). This technique can also assist you in prioritizing recurrent or bulk orders of undemanding goods as those with higher profit margins.
#3. Backordering
Backordering is a method that is applied to both inventory management and forecasting. Optioned ordering and optioned backorders are other names for it. Backordering is placing an order for a product that has been sold to a consumer but has not yet shown up at the seller’s location.
#4. JIT, or just in time
The idea of manufacturing and delivering a product just when a consumer buys it is known as just in time (JIT). Eliminating production waste and raising quality are the objectives. Taiichi Ohno created it for Toyota Motor Corporation in the 1950s and 1960s. With JIT, all inventories are maintained to an absolute minimum, and since the majority of products are made or assembled upon order, deliveries are completed more quickly.
#5. Consignment
The consignment technique is a popular sales and marketing tactic in the retail sector. Businesses of all sizes can profit from adopting it to increase income because it is such an excellent strategy for boosting sales.
#6. Cross-docking and dropshipping method
Dropshipping is where e-commerce is headed. At least, many experts concur with that statement. You may find it more affordable to sell your goods online by using dropshipping and cross-docking methods. It has even been called “the holy grail” by those who wish to launch their own company but lack the resources to build an inventory.
#7. Inventory cycle counting technique
The physical inventory of a business is counted using the inventory cycle counting method. This procedure is significant since it aids in preserving the accuracy and integrity of financial data.
Top Stock Inventory Management Software
Technology in the warehouse may empower employees and satisfy customers, as was just mentioned. So let’s look more closely at the software programs that give companies complete control over their inventory with only a few mouse clicks.
#1. Inventory management software
You can track orders, inventory levels, sales, and fulfillment with end-to-end software solutions like Zoho Inventory Orderhive Brightpearl TradeGecko, and Skubana.
They connect your entire supply chain, to put it simply. In this manner, you are always aware of the exact quantity of products you have in the warehouse and on the way out.
Make sure the platform you select interfaces with other essential technologies, such as your CRM system, eCommerce shop platform, and accounting software.
#2. Inventory control software
Within your warehouse and storage facilities, you can also find software that is entirely dedicated to inventory control.
You may create effective stock processes using tools like Odoo Korber and Fishbowl. By reducing stock levels, the goal is to maximize warehouse space while cutting expenditures. However, you’ll also have enough stock on hand to minimize the chance of running out.
Smart barcodes and RFID tags are also simple to integrate with these warehouse-focused systems for quick stock management.
#3. Omnichannel stock monitoring software
There are programs made expressly to help you manage stock across numerous platforms if you stock products across retailer networks and third-party marketplaces.
The Digital Shelf software from ChannelSight offers more in-depth stock management and inventory data. Real-time information on stock changes and pricing for each channel you sell on is included in its comprehensive coverage reports. Ensuring that products are consistently available and always priced fairly, enables brands to improve sales.
What Is Stock and Inventory Management?
Inventory contains all items that make up the company’s assets, while stock only includes those that are available for purchase.
What Are the 4 Types of Inventory Management?
Just-in-time management (JIT), materials requirement planning (MRP), economic order quantity (EOQ), and days sales of inventory (DSI) are the four different types of inventory management.
How Do You Keep Track of Stock Inventory?
As you go along:
- Select a tool for managing your inventory.
- Put forecasting first
- Sell goods chronologically
- Think about the demand for products.
- Perform inventory counts
What Is the Basic Stock Method of Inventory Management?
The base stock approach is an inventory asset valuation technique in which the LIFO method is used for all subsequent inventory, and the acquisition cost of the minimal amount of inventory required to continue operations is documented.
What Is the 80-20 Rule in Inventory?
According to the 80/20 rule, 20% of efforts, consumers, or any other unit of measurement produce 80% of the results. The rule says that businesses make about 80% of their revenues on 20% of their profit when applied to inventory.
How Do You Maintain Stock Inventory in Excel?
Advice on how to control your Excel spreadsheet so that you can accurately track inventory movement
- Avoid pitfalls and mistakes with Excel inventory.
- Update right away.
- Employ the cloud.
- Spend some time combining the data.
- Analyze your data.
- Review and audit.
- Know when to upgrade.
What Are the 3 Major Inventory Management Techniques?
The pull, push, and just-in-time (JIT) strategies are the three most popular inventory management techniques used by most firms.
Conclusion
In today’s world of eCommerce, a streamlined stock inventory management procedure is essential for business performance in addition to being a competitive advantage. You’re well on your way to improving stock and fulfillment management, which will benefit the bottom line of your company now that we’ve covered the necessary processes and tools.
- EFFECTIVE INVENTORY MANAGEMENT: Guide To Do It 2023
- SIMPLE INVENTORY MANAGEMENT: System, Services, Software and More
- BEST APPS FOR INVENTORY MANAGEMENT IN 2023
- Best 15+ INVENTORY SYSTEMS FOR SMALL BUSINESS in 2023 (+ Free Options)
- INVENTORY CONTROL MANAGEMENT & SYSTEM: Best Practice
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