Understanding the importance of inventory management
For many businesses, specifically in the manufacturing and distribution industry, companies such as manufacturing and distribution, inventory represents a large, if not the largest, portion of their assets. Therefore, it is important that management understands how to effectively manage their inventory. In this article,we will learn the importance of a good inventory management system.
Inventory refers to goods that are in various stages of being made ready for sale. Inventory can be raw materials, goods that are in production (work in progress), and goods that are finished and ready for sale.
Inventory management on the other hand involves controlling and overseeing purchases (from suppliers as well as customers), maintaining the storage of stock, controlling the amount of product for sale, and order fulfilments.
Modern Inventory Challenge
With the modern supply chain increasing the complexities of handling inventory, the importance of inventory management becomes irrefutable. Technology has created some challenges and opportunities for the modern business, both small and big. There has been an increase in e-commerce and Omni channel sales as well as increased cost of holding inventory over the years.
Just as technology has caused a potential challenge for businesses, technology has provided a solution.
Understanding the importance of inventory management
With the increase in e-commerce and Omni channel sales, businesses must understand the importance of inventory management as it plays a critical role in the sustenance of business because inventory management affects sales, purchasing and other areas. Some of the importance of inventory management for solving today’s business challenges are explained below.
1. With the increase in e-commerce and Omni channel sales, an inventory management solution will need to be able to handle sales from multiple channels in an integrated manner. Many businesses receive orders from a variety of channels: phone, web store, etc. In order to effectively manage inventory with sales coming from variety of channels, the inventory management solution must be able to keep track of sales regardless of the channel.
2. An inventory management solution will need to keep comprehensive and detailed inventory data to counter the increased in inventory turnover. When inventory turnover increases, the amount of information about the inventory sold, purchased and kept on-hand also increases. By having an inventory management system that keeps detailed records, you are able to go back and look at specific product information, and even filter it by certain criteria such as serial or lot number, etc.
3. Proper inventory management system helps reduce costs, prevent loss from theft, spoilage, and returns. With an inventory management system, management will easily know when to order for new stock and when not to bring in stock. This detailed information provided by the system will prevent overstocking and subsequently aiding in the growth of the business.
As such an inventory management system must be able to:
• Keep detailed inventory information
• Handle omni channel sales
• Allow your business to have unlimited inventory data
Built accounting services can aid your businesses to grow by providing a systematic inventory management software that can accomplish these three important inventory management requirements.