What is Inventory Management System?
Inventory is an initial part of retail applications. It is referred to as the goods and materials a business holds to meet the goal of resale. A variety of industries, including manufacturing, healthcare, education, government, food, and, garments widely follow Inventory Management System as retail operations extensively depend on such a system. It streamlines and centralizes all the processes for controlling the flow and maintains inventory to ensure the availability of the right amount of inventory at the right time and delivery of high-quality products as well.
It can be stated as the combination of hardware and software that oversee the monitoring and maintenance of the stock (goods and materials). It can be company assets, raw materials and supplies, or finished products ready to dispatch.
A robust inventory management system consists of the following:
- A system for identifying inventory items and other information related to it, including barcode labels and asset tags. Hardware tools, such as handheld barcode scanners and smartphones with barcode scanning applications to read barcode labels.
- Inventory Management software, which offers a centralized database of reference for all types of inventory. It should be coupled with capabilities to analyze data, create reports, and forecast future demands.
- Inventory management technique, such as Just in Time, First-in-First-Out (FIFO), Stock Review, and ABC Analysis. Policies and processes assistingin labeling, documentation, and reporting. Also, trained personnel to follow these policies and processes efficiently.
Types Of Inventory Management System?
Perpetual Inventory System—It includes inventory activities such as received inventory items, goods sold from stock, movement of items from one location to another, items picked from inventory to be used in the production process, and items scrapped. It renders the advantages of both providing updated inventory balance information and requiring a reduced level of physical inventory counts. It is by far the most preferred system for tracking inventory as it can draw substantially accurate results regularly; works best if coupled with a computer database of inventory quantities. Warehouse staff can update this in real-time using wireless bar code scanners.
Periodic Inventory System—
As the name suggests, this Inventory Management System
helps the business organizations track inventory periodically. This states that administrators can keep a track of the inventory at the beginning and the ending levels during a certain period rather than doing it daily. It only updates the ending inventory in the general ledger when a physical inventory count is executed. Generally, physical inventory counts are enough time-consuming. Hence, business organizations prefer to do it once a quarter or year. Meanwhile, the inventory account continues to display the cost of the inventory that was recorded as the last physical inventory count. Under this management system, all the purchases are recorded in a purchase account. The balance in the purchase account is shifted to the inventory account once the physical count is done. Later, it is adjusted to match the pricing of the ending inventory.
Barcode System—Such kind of system to manage inventory readily reduces the dependency and risk of errors made by manual actions. Being more accurate and efficient than manual processes, Barcode Inventory Management System updates inventory levels automatically when workers scan them with advanced tools or devices. It renders numerous benefits to the business organizations choosing its deployment to manage inventory. These include streamlining documentation and reporting, speedy and easy scanning, accurate records of all inventory transactions, elimination of time-consuming data errors, easy determination of minimum levels and reorder quantities, rapid ROI, elimination of manual data entry errors, and smooth movement of inventory within warehouses and within multiple locations.
Radio Frequency Identification (RFID) System—Professionals often acclaim this system an updated version of the barcode inventory management system. This Inventory Managementincludes affixing a small radio tag to a product. This can be read from up to 300 feet away and does not require to reach in line of sight to a scanner. Eventually, these tags are read faster than the traditional barcodes and accelerated the inventory counts efficiently. They can encrypt data with minimal manual intervention. With the RFID system to track inventory and completely automated processes, business organizations can witness reduced inventory shrinkage. This system prompts real-time inventory control and help businesses avoid return orders due to unexpected out-of-stock scenario. Reduced labor costs and better asset utilization are other key benefits of this advanced management system business organizations can procure.
In the absence of a robust Inventory Management System, the flow of goods and products through an organization will be in disarray. Such a system enables a business organization, particularly executing manufacturing, supply chain, and warehouse operations, to maintain a centralized record of every asset and item in the control of the organization. It provides a single source of information for the location of every product, vendor, supplier, specifications, and total items in the stock. Eventually, it enables businesses to know the time to reorder with improved accuracy and drive efficiency in their inventory management operations as well. Other key benefits offered by this system include enhanced transparency or visibility, reduced labor costs, elimination of deadstock, improved cash flow, better reporting, enhance forecasting capabilities, better organization, and improved relationships with suppliers, vendors, and partners.
Top 3 Measures To Prompt Inventory Management
1. Before picking a system to manage inventory within an organization, business administrators must understand the difference between different types of products. There are generally four types of products, which business organizations often use for inventory account.
a. Item— No packaging or assembling effort is needed and the product is ready to be dispatched and sold to the customers.
b. Assembly— Needs assembling by smaller item parts within the warehouse. For instance, a bicycle with a frame, wheels, and chains need to be put together in a finished ‘assembly.’
c. Family— It involves a group of similar items or variants of a parent item. For example. A t-shirt item available in different colors and sizes.
d. Case Pack— A case pack of 12 sunglasses shipped to the wholesale customer and sold individually. It is different from assembly as it is bundled together for efficiency purposes and can be fragmented into single items later.
2. Business administrators deploying Inventory Management System must ensure that each product must have a unique ID number known as an SKU or Stock Keeping Unit. It helps find the product easily as and when required. Also, a universal Barcode is required to regulate business operations with an independent e-commerce store, a conventional store or a big-box chain.
3. Business professionals must ascertain what products and to whom they are selling. Rigorously evaluating key measures to drive profitability in sales, customer lifetime value, and purchase size help business organization thrive and witness substantial expansion. Proper planning and more informed strategies help businesses avoid disasters caused by making decisions based on gut feelings. Also, organizations must create a system for processing and fulfilling orders to stimulate other processes with the inventory management system.
A power-packed inventory management help achieve efficiency and drive productivity in the entire organizational operations. It helps minimize costs, maximize sales and multiply profits. Integrating the entire business with automation and advanced technologies help enhance customer satisfaction and experience a notable buildout.