Inventory Management Strategies for Streamlined Operations

Inventory management is known as the act of purchasing, storing, utilizing, and giving a company’s inventory, which includes raw materials, components, as well as finished products, and the processing and warehousing of these items. Inventory management comes with different methods, each with its advantages and disadvantages, depending on a company’s requirements.

Inventory management must have inventory visibility, must know when to order, the amount to order and the place to store stock. Fulfillment of multichannel order processes usually have inventory scattered across a number of places all throughout the chain of supply. Businesses require an accurate image of the stock inventory to ensure fulfillment of customer orders, lower shipment turnaround times and reduce stockouts, oversells as well as markdowns.

How Inventory Management Works

A high-angle view of an organized warehouse with stacked boxes

The objective of inventory management is to know stock levels and the stock’s location in warehouses. Software for inventory management tracks the flow of products from the supplier through the production procedure to the customer. In the warehouse, inventory management tracks stock receipt, picking, packing and shipping.

Why is Inventory Management Important?

Inventory can be a business’ most crucial asset. All the aspects of the supply chain combine in inventory management. Insufficient inventory can create unsatisfied customers especially when it’s needed. But a big inventory has its own disadvantages, like the storing cost and cost to insure it, as well as the risk of spoilage, damage and theft. Companies with complicated supply chains and manufacturing procedures need to find the right balance between having insufficient inventory on hand or too much.

Inventory Management Methods

Depending on what type of business or the product is involved, a company might use various inventory management methods.

Just-in-Time Management (JIT)

This method allows companies to reduce significant amounts of money and waste by buying and keeping just the needed inventory to make and sell products in a certain time frame.

If demand unexpectedly skyrockets, the manufacturer might be unable to source the inventory it requires to meet that demand. Even the tiniest delays can be a nuisance; if a key input does not come “just in time,” a bottleneck could result.

Materials Requirement Planning (MRP)

Materials Requirement Planning method is dependent on sales-forecast, meaning that manufacturers need detailed records of sales to anticipate their needs in the inventory and pass those needs to the suppliers in a fast manner.

Economic Order Quantity (EOQ)

The aim of the EOQ model is to make sure that only the required amount of inventory is bought per batch so a business does not need to order too frequently and there is no extra inventory sitting on hand.

Days Sales of Inventory (DSI)

This ratio calculates the average time in days that a business takes to turn the inventory, including products being worked on, into sales. DSI is also referred to as the inventory’s average age, days in inventory (DII), days inventory outstanding (DIO), days sales in inventory, or days inventory and is interpreted in a number of ways.

Types of Inventory Management

Barcode Inventory Management

Warehouse worker scanning barcodes on shelves for inventory tracking

Businesses utilize barcode inventory management systems to categorize a number to each item they’ve sold. They could associate numerous data points to the number, which includes the supplier, dimensions of the product, the weight and even variable data, like how many are in stock.

Periodic Inventory Management

This is a way of inventory valuation for the purpose of financial reporting in which a physical inventory review is done at specific times. This accounting process takes the inventory at the start of a period, adds newer inventory sales during the period then deducts the end inventory in order  to derive the cost of goods sold (COGS).

RFID Inventory Management

Also known as radio frequency identification, this system wirelessly transmits a product’s identity in the form of a unique serial number. It keeps track of items and provides detailed information about the product. The RFID based warehouse management system can enhance efficiency, improve inventory visibility and ensure the rapid self-recording of receiving and delivery.

Conclusion

Good inventory management is the backbone of smooth operations in any business. It ensures you have the right stock, at the right time, in the right place, avoiding waste or delays. By using strategies like JIT, MRP, or barcode systems, businesses can reduce costs, improve customer satisfaction, and streamline their supply chain. With the right tools and methods, inventory management becomes a powerful way to keep operations running efficiently and customers coming back.

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