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Inventory management is the process of supervising, buying, selling, storing, and using inventory. In technical terms, it is a process of tracking the movement of goods and analyzing their stock value. The process is beneficial on either side of the supply chain, i.e., receiving or delivering raw materials and final products to the customers.
Inventory management is the sole reason why the right product reaches the right spot at the right time. The process ensures product availability at every contact point, like a warehouse, retail stores, and distributors. Inventory management, one of the crucial steps of the supply chain, helps businesses cut freight and shipping costs, boost cash flow, maximize profit and be profitable for extended periods.
Types of Inventories
Inventories are an essential element of a supply chain, and they are classified based on their application:
1. Raw Material Inventory: This inventory is used to maintain and supervise the raw materials. Raw materials are the key components that work as the building block of the products. Many businesses outsource or buy raw materials; thus, maintaining and analyzing raw materials becomes crucial. For example, a cement manufacturing plant will have to store limestones, shells, silica, iron ore, and other elements.
2. Work-in-Progress (WIP) Inventory: The products in an unfinished state are referred to as work-in-progress products. For example, a chair kept in a paint shop for painting or a bar of chocolate laid on the packaging belt waiting to get packed. Losing products from the WIP stage is amazingly easy, so checking every product is necessary. WIP inventory helps you in doing that.
3. Finished Goods Inventory: The final products ready to be dispatched and sent to their final customers are called finished goods. Finished goods inventory is the type of inventory that deals, analyzes, sends alerts and much more with final products.
4. Maintenance, Repair & Operations (MRO) Inventory: MRO inventory stores, handles, and analyses goods that are not related to final products but are essential in the manufacturing process. E.g., cleaning chemicals, lubricating oils, safety equipment, batteries etc.
Challenges You May Face in Inventory Management
Inventory management is not a cinch. Failing to have effective and efficient Inventory management can daunt your whole supply chain. Here are some of the critical challenges that an inventory manager can face:
1. Low or Negligible Data Accuracy: In present times, you cannot afford to believe in annual inventory stocking. With the pace at which everything is mobilizing, you must know your real-time inventory. Also, in the case of different warehouses, you will need to establish a system like Inventory planning software, which gives you precise data daily.
2. Obsolete Materials Becoming Waste: Let’s face it, you cannot sell every product from your warehouse. Some products will be left behind and converted into obsolete. However, when using them, most inventory managers tend to choose new products that convert obsolete materials to waste. Repeating this occasionally increases waste, resulting in high production and storage costs.
3. Battling Warehouse War with Overstocking: One crucial inventory management challenge is overstocking, which occurs due to poor stock management. Gone are the days when excel would suffice your requirements for maintaining stocks. Today, you need world-class Inventory Planning and Forecasting software to avoid overstocking.
4. Dealing with Inventory Waste: As discussed above, your inventory will inevitably have waste. However, it becomes critical to how you deal with it and what steps you take to minimize it. There are many ways to obtain inventory waste; a few are lack of proper training in personnel handling products, vague inventory management software, etc.
5. Growing Product Line: While growth is essential for every business, adding new products to your product lines becomes difficult for your inventory. New products need productive management, and inputting data manually will affect efficiency.
6. Ever-changing Supply Chain: Supply chain changes almost daily, pressuring inventory management. The change is witnessed globally and cannot be curtailed; hence the delivery time increases, which can sometimes result in losing customers.
Sole Solution for the Challenges: Inventory Management Software
A leading Inventory Management Software is the definite solution for most of the challenges mentioned above. Commonly known as Inventory Planning Software, it has the potential to transform your supply chain and reduce inventory wastage. Inventory Management Software is essential for keeping your inventory at the optimal level.
Inventory management is tedious, especially if you face any surplus or understock because of poor stocking. The software always comes to your rescue. It lets you identify which product you need, in what quantity and when.
Owning inventory in the precise amount is one of the most challenging supply chain tasks. Having the proper inventory at the right time at the right place is not at all possible without the effective use of Inventory Management Software. Read on to learn what features make inventory planning software effective.
Features of Inventory Management Software
When you select inventory planning software, it becomes crucial to keep your requirements in mind. Software designed for a manufacturer will be different from one designed for retailers, thus, prioritizing your needs will help you narrow down productive software.
Here are some of the basic features that every inventory management software should have: