What Is Inventory Management?
Literally, the word 'inventory' means anything in stock that can necessarily do a business; however inventory serves as a business's vision and is considered as a tangible aspect of doing a business that can highly affect other parts or components of a business. Inventory includes raw materials, finished goods, and stocks which indeed represent and involve a large portion of business investment and management. Unhealthy inventories can lead up to bad management and high customer turnover rates due to product quality and communication systems which of-course can be affected greatly by unhealthy conditions of the inventory.
Successful Inventory Management
Generally speaking, all businesses have to balance costs and profits in order to calculate the total amount of profits made. Inventory management involves monitoring expenses and revenues to ensure its business's safety. Many businesses failed to calculate the amount of expenses and costs they have to pay, not only for direct storage costs, but also for taxes and insurance; what is left is to considerately calculate and pinpoint the expenses, costs, revenues, and is able to predict future business plans not to increase the loss of profit and to remain stable. The business's manager would also have to consider the following:
1. Maintaining stocks
2. The increase rates of inventory turnovers
3. Keeping stock low
4. To have inventory in hand
5. To obtain low prices by increasing the volume or quantity of products in inventory
It is important for a business's manager to compute and calculate the turnover rates in order to make future predictions and prepare for further changes to adapt to a new trend and make changes that will improve performances within a business. It though, might be hard to seize and to grasp these responsible concepts and managing process which can vary from each other.
The Purchasing Plan
For instance, a customer wants to purchase a large stock of steel and aluminum. Ridiculously, a business of-course has to prepare and has to have spare stocks in the inventory to supply customers with products and the amount of stocks needed. Also, buying requires advance planning in order to determine inventory needs to complete orders without stopping abruptly. For retailers and small businesses, it is decisive and complex to plan ahead on supplying enough amounts of goods and products as well as calculating for expenses, costs, and profits that will be made by the end of the sale. The purchasing plan consists of 5 main details which include: when commitments should be placed, when the first delivery should be received, when the inventory should be peaked, when reorders should no longer be placed, and when items should no longer remain in stock.
Controlling the Inventory Management
In order to maintain items that will be needed for orders and placements and to eliminate those unwanted, it is important and healthy for businesses to make plans, rules and regulations, and orders to maintain stability and to make sure there is control of the inventory, both on order and both in stock. In order to control the whole inventory it is of course going to be busy and traffic-like for most managers; there are several guaranteed and proven methods for inventory control which are arranged first from the simplest method down to the most complex method. These methods can encourage business managers to work harder and put effort into work. These methods will keep control of the inventory both in stock and for orders; the steps will guide the inventory management safely and right which will eventually increase productivity and minimize turnover rates.
1. Visual control- it enables managers to see and observe whether more inventory is needed in stock or needed for orders that are placed. Most of the time, records are not needed in this method but expensive products, the amount, and the time it takes to deliver or ship might need records and writings for guarantees.
2. Tickler control allows mangers to count daily the numbers or the quantity of inventory in stock in order to know the current amount of inventory left in stock.
3. Click Sheet control allows and enables managers to record the quantity and the amount of inventory left in stock. This method is widely-used because records are more reliable than visuals and verbal information since it cannot be changed easily unlike other methods.
4. Stub control enables managers in retails to keep or left out a portion of the price ticket so that it can be used later to see how much items are sold out in daily basis.
Businesses are greatly impacted by the diversity of work places and cultures which affects how things are done in modern. Technology is one of the main factors that influence business changes such as productivity, financial systems, money circulation, transportation, distribution, advertising, and many other things. With a higher level of technology, businesses can use this great opportunity to make improvements and to increase quality as much as possible to attract customers. In controlling the inventory, computers and functions are also used for keying of items and for inventory checks. Some rules and regulations include:
1. Point-of-sale terminals relay information of items or products sold to managers via technological tools like computers while the facts and details are printed out through a printer which makes life a lot easier in business.
2. Off-line Point-of-sale terminals direct information and items or products to the supplier or the manager's computer where shipping of products usually take place deliver items and products to the buyers.
Tips for Better Inventory Management
At times of delivery you it is best to:
- Recount numbers of items that are ordered and recheck the delivery receipt
- Check if there are damages on the carton, if visible then make sure a note is written on the delivery receipt to make sure everyone knows about the changes and damages
- Inspect for damages once items shipped
When Damage Is Discovered:
- Retain damaged items
- Call a carrier to report the damages
For Managers:
- Do not include unnecessary information about a specific product when writing specifications
- Include all information that has to do with researches or tests
Summary
Inventory management is indeed a difficult task to manage even if managers are experienced and advance since businesses have different cultures and systems that would greatly affect ways things are done. If a manager is strong enough and wise enough to control and to lead the business to the right direction then it would probably be an easy task for them.
