Hello, in this blog, we will discuss what inventory management is, its types, how to choose software, how to set up an inventory system, and tips to manage.
- What is inventory management?
- Types of inventory
- Features to look for in Inventory management software
- How to Set Up an Inventory System?
- Tips to manage inventory
A retail store is the life of an area/place, but somewhere it gets stuck in a place because of improper inventory management. Generally, we all know that the inventory is an asset, but when you fail to manage it will be considered a liability as well.
So, it is necessary for a business that operates or implements a well-integrated inventory management system that will help to bring a buyer on time, save your product from wastage, and you will be in profit.
What is inventory management?
Inventory management is the key function of understanding the demand for defined products and the profitability of those goods of a company and the demand for those stocks. It is important for all small businesses and industries.
Types of inventory
Inventory management is classified into the following categories –
Buffer inventory –
It is known as contingency stock. It refers to the excess that a company, organisation, or retail store keeps in reserve to save against uncertain conditions in the future and make sure that there should be no disturbance in the production of supply and demand or lead time.
Transportation refers to the product that has not yet been received from wholesalers to retailers. It is also called transit inventory.
Seasonal inventory refers to the product in high demand at a particular time, season, or any occasion. For example, during the rainy season, we need an umbrella and a raincoat.
Anticipated or hedge inventory refers to the stock of goods that save extra or keep expecting goods for uncertainty in demand or unexpecting changes in customer demands in the future.
Cycle inventory –
Cycle inventory is the inventory that a manufacturer or wholesaler uses for their everyday trade to fulfill the regular demand/sales.
Production Inventory/ Raw Material –
Production inventory or components refers to all manufacturing and parts of stock that are available for use with the manufacturer.
Finished goods –
Finished goods refer to the total number of stocks available for dispatch to distributors and consumers and are ready to fulfill the different market demands.
Miscellaneous inventory refers to the purchased items by the sellers from the person with whom the seller is not a party to a franchise contract.
Inventory management software should have the following:
- Keep track of time
- It should be Prevent Production storage and product
- Optimise warehouse and employees’ time
- The quick response of barcode scanning
- Easily can analyse the inventory in any kind of device
- Demand forecast
- Prevent cash flow and cost reduction
- Multi-Location management
- Prevent excess stock and much raw material
- Quick billing facilities
- Tracking fast and slow-moving stock
- Control over error
How to set up an inventory system in excel?
There are tips to set up an ideal inventory system are following –
- Make a column for location name, time, and date.
- Creates a column for items – item names
- Description of your item – details of products
- Number of items
- Units of the items – quantity of the items such as in kg.
- Generate a column for the price where the product price can be added accordingly.
- Create an inventory policy to follow the people
- Generate a tracking system in your software
Tips for managing inventory
There are some tips to manage your inventory for the productivity of cash flow –
- At least two people should be responsible for inventory
- Track all records of products – From time to time, track all information of the products in your inventory, such as origin, DOE, MFD, name, and price.
- Audit of inventory – Once a year, monthly, weekly and quarterly, you should check the spot of the items. And, ensure that it matches up or not with your expectation or what you think. After that, note it down on a sheet of paper.
- From time to time, try to train your helper.
Tips to maintain the inventory stocks –
- Carrying Cost – It shows the outline of your expenses, such as – wastage, insurance cost, maintenance, storage, and other expenses, which add on the top of your purchase price. Sometimes this cost increases by 15-20 percent because of that, you can’t identify your accurate profit and loss.
- Drop-Shipping – It is a proper arrangement where the whole inventory process is managed by the wholesalers and manufacturers. And it is a totally Hassle-free and cost-free method where you can operate your business without maintaining your own inventory.
- A, B, and C Method – Set your product in A, B & C levels so that it will be available on time for sale. For example – costly and fast-moving products keep at level A, regular and less costly products keep at level B, and average and slow-moving products keep at level C.
- Track all received and sales products – Keep it updated with all sales and ordered items as per the date, time, pricing, locations and name of the suppliers and buyers, mood of payment, etc.
- Try to use the latest and updated software – Make sure that your software is well integrated and can help you to manage all stocks.
- Analysis of supplier performance – from time to time, analyse your supplier performance if you have a supplier or third party that supplier is delivering the product frequently late or untimely or short an item/order. Take action and try to discuss with them and try to find out the problem. Be prepared to deal with the uncertainty of stocks.
- FIFO (First In – First Out) method – It is used for perishable goods and prescription drugs, such as food, cosmetics, flowers, etc. It is used for the purpose of cash flow within the calculation of the cost of goods sold.
If you have any doubts or confusion, kindly drop us a comment in the comment box.