Finding an accurate magical number through which you can manage overstock issues or out-of-stock issues is a complicated task. Finding the right stock level is a mystery that is still yet to be solved especially when you are managing inventory manually. However, that is why you need to eliminate manual processes in order to remove inaccuracy from the system. Let us know what is inventory management and optimization!
What is Inventory Management & Optimization?
As we all know inventory management is the process of managing, storing, and selling inventory. This inventory can be raw material, finished products, or MRO (Maintenance repairing operation) parts. Inventory is crucial in business as it might the main source of revenue generation.
Inventory management is also knowing the right stock level in the right place at the right time and cost as well. In simple words, inventory management helps streamline operations and increases return on investment.
Inventory optimization is avoiding wastage of inventory so that expenses can be minimized. For this purpose, a minimum re-order of inventory is given to eliminate any type of wastage. Inventory optimization means producing maximum with minimum inventory. There is always room for improvisation especially in inventory management that improvisation is optimization. That results in saving inventory expenses.
What are the various inventory optimization techniques?
For inventory optimization data is the most important factor without data you will not be able to perform any inventory optimization. Furthermore, the software is also required. Therefore, data is mandatory! Various inventory optimization techniques are discussed below:
Demand forecasting
Data is helpful in forecasting demands; it can be helpful in keeping your business ahead of the curve. However, for this purpose, you need automated software that will help in forecasting demands. Data analytics and numbers of inventory are utilized and software assists in forecasting demand. With demand forecasting, you can also know when inventory price is low or high that helps in planning when to buy & when to ignore.
Calculate re-order point
Getting out of stock is one of the most common problems due to which businesses suffer. It only leads to business loss but customer loss and disappointment also occur. With the inventory management software, you can easily set a re-order point and you will not have to worry about out-of-stock inventory. This software alerts your team when inventory is about to be finished or below the defined specific number. It keeps your team free for other activities furthermore you can set a re-order point for all required inventory.
Stock level identification
For this purpose, you can use previous data. With the help of data, you can identify how much inventory you use in each season and calculate the average of the last 4 to 5 years and develop data and interpret data accordingly. This will help you set up the average stock level and it can also help you know setting the exact number for low stock level & similarly for high stock level as well.
Monitor whole supply chain
For monitoring the whole supply chain asset tracking technologies are used such as Barcode, QR Code (Quick Response Code), RFID (Radio frequency identification), etc. These tracking technologies come in the form of tags & labels. These tags are attached to the inventory package so that you can know exactly where the package is, when it will be delivered, and so on. In previous years you do not get an update & or had an idea about the package but now you can have. When you have accurate information, you are empowered to make better and informed decisions that will help in cost-cutting.
Audit Inventory
Sometimes we are so reliant on data that we do not physically check all the inventory. However, it is an important activity that an audit of inventory is done. It can be done for various reason such as to check whether number match with the software or not! If the quality of the inventory is good! Sometimes when inventory is not utilized its quality and effectiveness start decreasing. In order to avoid these problems, a physical check of inventory is important.
Conclusion
here is no doubt that inventory optimization will make your organization more effective and more competitive. However, for inventory management and optimization inventory management software is essential. It can play a crucial role in the effective management of inventory.
It can save a lot of money by avoiding unnecessary expenses on inventory. Furthermore, it can provide data and information that can help your business grow. If you want your business to be fruitful and less complicated then investing in inventory management software is the need of the hour. This inventory & asset management software can provide several other advantages as well.
Inventory management now has become one of the most common and important practices in businesses. According to Global Market Insights, “Inventory Management Software Market size crossed USD 3 billion in 2019 and is estimated to grow at a CAGR of over 5% from 2020 to 2026.”
