By Joe West, Logistics Manager
Any company that wants to effectively manage ordering across multiple divisions can benefit from an inventory management process.
Many organizations don’t consider inventory management an important part of their business processes. This may be because they’re not familiar with the concept, or because they aren’t aware of the benefits inventory management can provide. The reality is that any company managing multiple documents can be impacted if they run out of inventory, and they may need immediate access to inventory reporting.
It makes a difference.
So, what IS inventory management?
A component of supply chain operations, inventory management is the process by which companies supervise the ordering, storage and use of items to produce the products they sell. It’s also the process companies use to oversee and control the quantities of products they sell.
A lot goes into balancing the right amount of inventory on hand. Maintaining an efficient inventory management system is more complex than most people realize. There’s a lot at stake. A company can face many financial setbacks if it mismanages its inventory.
It’s a process, and there are several different components of the process:
Managing Large Document Volumes
A good starting point is to calculate the right amount of inventory needed. Order too little, you risk not being able to meet demand. Order too much, you risk having to sell extra stock at discount prices. According to a poll by GetApp, 46% of business owners make their reorder decisions based on information from previous months. Maintaining the right amount of volumes requires companies to keep stock of past trends. Doing so paves the way for the future.
Cost of Managing Your Document Inventory
Price is crucial to many aspects of business, and inventory management is no exception. Companies really want to dial into the best price they can–it should be high enough to make a profit, but low enough to entice customers to actually buy. Going too low or too high creates issues either way. Luckily there are some different tools that can help. One is the economic order quantity formula, which calculates the number of business units your organization should be adding to its inventory. The formula can help companies reduce the total costs of inventory management.
Critical Timing of Inventory Management
Timing is another critical component of inventory management. If stock arrives too early, you’re going to have to find room for it. If it arrives too late, you’re missing out on opportunities because you’re out of stock. To compensate for this, companies implement reorder points. It’s determined by another equation which helps identify the best time to replenish depleting inventory. It usually factors in emergency stock–extra inventory kept on hand in case of emergency situations. Timing makes all the difference between having just enough, too much or too little inventory on hand.
Distribution of Document Inventory
There used to be geographic limits on where a company could sell their products. But with the advent of ecommerce, those limits were quelled. Companies can now sell and distribute their products all over the world with relative ease. However, that doesn’t mean there aren’t a few challenges with this approach. Managing the inventory levels in your warehouse is critical. In today’s world, customers expect to receive their products as soon as possible. That means your stock has to be at the ready to ship out and delivered at a moment’s notice.
Inventory management helps customers understand and better manage their assets including:
- replenishment lead time
- carrying costs of inventory
- inventory forecasting and valuation
- inventory visibility
- future inventory price forecasting
- physical inventory
- available physical space
- demand forecasting
- replenishment processes
Often, these needs can have competing requirements, but by understanding an organization as a whole, it’s possible to provide optimal inventory levels, even as a company changes or grows.
Most people don’t realize how in depth an inventory management system can become, and why expertise is important in building a system. When beginning this process, it’s important to have a strategy behind deciding the location of popular pick items vs. slow-moving items. It’s also critical to regularly generate usage reports to determine the quantity to refill when an item has hit its refill point.
Fineline excels in this area because we have the right technology combined with people who understand the process and work every day to ensure it meets client needs. We understand how to integrate computer-based ordering systems with a process that employees can use to great benefit.
Do you have an inventory management system at your organization? What challenges have you seen that you’d share with someone considering this process?