In business organizations, a number of functions like production, research and development, purchasing, marketing, finance etc are often dependent and connected to each other. Although each of these operations is important yet some like logistics and inventory are the backbone of businesses because they can make or break the business. Inventory management is the most important function for marketing manager as well as the finance controller because it not only affects the supply chain but also affects the balance sheet of the businesses.
A report said that 81 percent of customers experienced that the product they wanted to buy was out of stock in the past one year while not only decrease the sale of the companies but also leave their shoppers disappointed with many of them switching to other companies to buy the products. Keeping fewer inventories than needed cause this problem to the companies but that does not mean companies should buy years’ worth of inventory up front because keeping more inventory than needed is cash sitting idle.
The money which could have been used by the company to hire more employees, to do marketing, and to do other things that could have helped their business. So it’s of utmost importance for any organization to keep optimum and simple inventory management system so as not to face the financial problems.
In order to maintain simple inventory management system, organizations must first keep in mind the type of inventory they have. If they have to manufacture products, the raw materials must be available on hand or if they have to sell products, then they must have finished products readily available to ship. They must access their sales, they should keep more inventories of the products they sell the most and less inventory of the products they sell the least.
If some products are not selling much and they are occupying space, then those products should be deleted from the company’s portfolio. Fix a minimum level of stock for each product, so that if the product inventory reaches the minimum, reordering can be done very fast so as to not run out of inventory. FIFO is an excellent technique for Simple Inventory Management for goods that decay very fast like in the dairy sector.
Proper computerized systems or manual checks should be implemented to keep exact track of the inventory. Radio Frequency Identification technology can speed up this whole process. Also, proper RFID tags can be used to stop theft and shoplifting by not only the customers but also the employees. POS programs should be used to give the production department update stats about the sold finished goods so there is no delay in restacking the inventory.
Simple inventory management system can help to run business very optimally with minimal losses, the absence of which will definitely cause huge losses to the businesses. In past one year, 1.75 trillion dollar losses were reported by the retailers due to improper inventory management system. Implying these steps in your business and organization can prove to be a very convenient path in future.