A business is known for its services and assets. A company’s most significant asset is its inventory. An organization’s raw materials and finished goods are the heart of its operations.

When it comes to inventory, whatever your product line or category be, management is considered to be agnostic and evenly required in order to keep a track of cash flow, sales and orders.

In this article, you will learn in-depth about inventory management, its types, and its benefits.

What is Inventory Management?

It refers to the process of placing orders for, storing, utilizing, and reselling a company’s inventory. This includes managing raw materials, components, and finished items as well as the storage and processing of such commodities.

Understand this with the help of the example presented:

what is inventory management system and how is it important for conducting business

Depending on a company’s demands, there are various forms of inventory management, each with advantages and disadvantages.

Types of Inventory Management:

Just-in-Time Inventory:

This method allows for the reduction of waste and excess costs. Companies can save money and avoid waste by maintaining only the inventory required to make and sell products.

Storage, insurance, and liquidating or getting rid of excess inventory are all less expensive when using this technique.

Materials Requirement Planning (MRP):

The main reliance is on sales forecasts in this inventory management technique.

Manufacturers are required to maintain accurate sales records in order to accurately estimate their inventory needs and promptly inform their suppliers of those needs.

Economic Order Quantity (EOQ):

The EOQ model aims to guarantee that the right amount of product is procured per batch. This ensures that the business does not need to place orders repeatedly or have an excess of stock on hand.

In this model, holding and setup costs are included in the costs of inventory.

Days Sales of Inventory (DSI):

This financial ratio shows the typical number of days it takes a business to convert its inventory, which includes finished goods, into sales. 

The figure represents the liquidity of the inventory and the remaining shelf life of the current stock in an organization’s inventory.

5 Benefits of Inventory Management:

Increased Efficiency:

Inventory tracking helps businesses retain less inventory on hand while enhancing order accuracy, which is one of its most fundamental advantages.

Businesses can take advantage of the robust capabilities of inventory management and the advantages of inventory tracking software to stay flexible and reduce inventory.

Your ROI for the system you just integrated can be increased by implementing a few of these tactics.

Cost Cutting:

Inventory management also reduces the cost of holding unused things.

Inventory managers can relax knowing that the important items are programmed to renew automatically as the system determines the right quantity of specific products. This frees up space for a wider selection of goods and reduces the cost of keeping inventory on hand.

Less error means fewer mistakes, which means less money spent on damage control.

Avoiding Excess Inventory and Stock Outs:

If inventory levels are not constantly reviewed, they might easily grow too high or too low.

Both outcomes are undesirable; buying insufficient quantities of a well-liked product might result in stockouts and irate customers. When there is an excess of anything that cannot be transported, storage space is used.

Fortunately, good inventory management may intervene and stop these terrible occurrences from disrupting the entire supply chain.

Enhanced Customer Service:

The goal of inventory management is to improve and assist in uplifting you in the eyes of your clients.

The proper product is delivered to the correct location with increased precision, and the speed of automated processes streamlines the delivery of the product in question.

Giving clients the means to track items’ whereabouts and estimated arrival dates reduces their anxiety and spares them from fielding inquiries.

Your customers should be more appreciative of you due to the tools that an inventory management solution offers once the system is implemented.

Automation of manual tasks:

The finest systems frequently include barcode scanning or other flexible inventory processing capabilities. By doing so, labour-intensive manual tasks like manually entering product or box numbers one at a time can be eliminated.

When this kind of technology is incorporated into your inventory management procedures, employees or automated systems can scan much more frequently.

Your staff will have more time to work on more crucial projects or do what people do best: plan for the future as you free up resources and automate additional jobs.

Bottomline:

Getting your business aligned with a smart inventory management system allows you to have a hassle-free environment for managing the business. You are presented with the freedom of improving your product quality and increasing sales manifold.

Vyapaari offers a One-stop-shop solution for your business management. We help you enhance, expand and scale your business with ease. So what stops you now? Be Smart! Be Modern! Be The Vyapaari!!