Inventory management is a practice carried out in a company to ensure you have enough stock on hand. Inventory is the actual listing or accounting of parts, items, and raw materials used in the company’s production and sales. Stock storage and distribution are managed and regulated through inventory control. Stocks/ inventory optimization can be carried out by forecasting demand, managing supply variables while adjusting dynamically to inventory parameters and stock regulations.
Companies gain precise buffer, replenishment, and overage stocking levels through inventory optimization systems depending on demand. Click https://xtivity.com/ongoing-inventory-optimization/ for a robust baseline solution regarding practical parts inventory optimization system. Inventories can be categorized into;
Maintenance, repair, and operations (MRO) inventory: This entails supplies that maintain the business or support production. Examples include gloves and masks, repair tools, valves and compressors, printer toners, computers, glass cleaner, office supplies, and brooms.
Raw materials/components: Integrates materials used to create and finish products. A company manufactures a natural material from an original form to either a recognizable or unrecognizable product.
Work in progress (WIP): The inventory features items in production entailing labor, components, overhead, and packaging materials.
Finished goods: This includes final products ready for sale.
Inventory control techniques
Comprehend your demand: Carry out an accurate demand forecast to control your stock levels and satisfy market demand. When forecasting, consider; seasonality, product lifecycles, trends, and qualitative factors like competitors and sale promotions.
Recognize your star products: Classify items in the warehouse as per the value it does the business. Through the ABC analysis, split A is critical to the company and C as items with minor importance.
Set stock control policies: The established approach facilitates stocking the suitable goods in appropriate amounts. Integrate a policy to reduce excess stock and remove obsolete items.
Introduce service level targets to optimize stock: Consider customers’ expectations concerning delivery and availability. High service levels boost sales and company reputation.
Fine-tune your stock replenishment strategies: Before restocking, factor in techniques such as demand forecasts, cost-effective order quantities, and supplier lead times. This approach aids in accuracy and prevents stock-build up.
Carry safety stock to reduce stock-outs: This inventory is used to prevent stock-outs and backorders whenever the supply is delayed or forecast is exceeded.
Inventory Analysis and its benefits
Inventory analysis entails researching how product demands vary over time. The approach aids businesses to stock the required amount of goods that will satisfy the market. The analysis through the ABC approach, Leverages Company profits by lowering costs and supporting turnover. Some benefits offered include;
Reduce stockouts: Through the analysis, you can anticipate demand and deter stock-outs
Reduce wasted inventory: This ensures you comprehend when and how much demand is for products.
Improve cash flow: Inventory analysis helps the business identify which items have high salability.
Excess stocks impact the stock turnover negatively and consume working capital. Inventory management is imperative for manufacturers in reducing the length of time that the stocks stay in inventory. Retailers use inventory management to maintain demands.