Every organization understands and appreciates the need for effective inventory management. After all inventory is the lifeblood for any business that relies on a supply chain. Inventory is the beginning node from where rest of the supply chain forms its links until it culminates with customers.
That said, is your organization doing enough to integrate a reliable inventory management system? Are employees aware of standard guidelines to improve inventory management? Studies have proven that scientific and systematic procedures based steps to improve inventory management improve stock cycles by 20% to 50% and aid in reducing the instances of obsolete stock.
Here are 6 questions you must ask yourself to find effective methods to improve inventory management. The answers also describe in detail modern inventory management techniques that will boost working capital strength significantly.
1) Does your company have a robust system of determining and fixating stock levels?
Supply-savvy organizations rely on statistically formulated stock levels to eliminate the risk of stock outs or excess piling of stocks. They use best inventory management techniques like setting up maximum, minimum, re-order, average stock levels to help in identifying the exact quantity of stock needed to conduct its operations in a smooth manner.
Safety stock calculation strategies can be followed to make sure there is enough stock on board to meet demands at any given time.
Tip: Establish stock levels to ensure ready availability of inventories at optimum quantities.
2) Are purchases based on economic order quantities?
Like in the answer above, excess piling of stocks can prove disastrous since the inventory carrying costs and order placement costs are hefty. Economic Order Quantity is the statistically right quantity of stock which will provide the exact amount of stock it will require to carry on effective inventory management without any stock outs; that too at minimal costs.
It is one of the most widely used effective inventory management techniques and one that is regarded as the best ways to improve inventory management that will not only result in cost savings but also in improved inventory turnover.
Tip: Compute and establish an inventory procurement process based on EOQ.
3) Is the entire process of material receipts, issues and stock taking automated?
Using manual systems as part of inventory management process is so passe. Inventory management techniques based on automated systems have become the norm for any enterprise that needs to cut down manual errors, hasten processes, get information on the go and so.
For an online business, a real-time simple inventory management process is a must to stay abreast with competition and customer interests. System based stock management is the ultimate advice a business can find when searching for how to improve inventory management.
Tip: The entire process of inventory procurement, storing, issuance, should be based on an automated effective inventory management system.
4) Is there a uniform and consistent way of creating and maintaining inventory masters?
SAP defines a material master as the descriptions of the inventory that the company procures, stores and uses in its routine processes. Consistent updating of item codes/descriptions ensure that material master data is reliable for stock movement analysis. Specifying the right way of adding a new item of inventory to the master, editing the description, etc. will ensure that material data is consistent and free of duplicates or redundant entries.
Tip: Every material should be assigned a material code and description that is unique & consistent.
5) Is there a system by which dead stock or slow moving stock is constantly monitored?
Obsolete stock is like carrying around dead weight that will not derive any value. In fact, it will only drag your profitability down. A stock can be identified as slow moving, non-moving or dead stock only if there is a proper system for inventory management. Ensure that you carry out regular physical inspection of tangible inventory to identify and segregate non-usable stock. Similarly keeping a separate track of their shelf life will also help in controlling deadstock levels.
Tip: Keep a separate track of slow-moving and non-moving stock to avoid piling up of dead stock.
6) Has your business embraced cloud technology, especially for inventory management?
Cloud technology enables data accession from anywhere, anytime from any device. There is an uncanny advantage that your employees will gain from being able to access inventory modules from multiple devices. It ranks as as one of the best inventory management processes steps.
SaaS inventory modules make it possible to access real-time inventory data from anywhere, anytime. It will also streamline present inventory management methods at diminished IT costs. Exploiting cloud technology has become an essential strategy for all modern enterprises aiming profitability.
Tip: Empower your employees with cloud technology to unleash productivity.
Effective inventory management is a vast subject with too many complications involved in it. These inventory management guidelines offer path breaking results for all sizes and types of businesses. The above questions and the techniques that are discussed as their answers will businesses with substantial investment in inventory to cut down deadstock, improve stock turnover and establish sound inventory management processes.
Contalog is an efficient inventory management system that helps businesses overcome common operational hurdles that enterprises face in managing their stock. Contalog not only automates the system of inventory management but also brings to the table a wide range of impressive features that will enhance the efficiency with which inventory is used.