Inventory management is the administration of a company’s inventory. It is a vigilant control and monitoring of the supply and demand needs of a business. Having either too little or too much stock is unhealthy for the business and can increase corporate expenses unnecessarily. Understanding the basics of inventory management is a fundamental part of running a successful business.
Having an accurate account of currently stored inventory and merchandise is paramount. The inventory manager should have an appropriate variety of stock available for sale but maintain an ongoing turnover rate to avoid stale or obsolete inventory. Idle stock should be noted and removed. Stagnant inventory loses its value over time and should be replaced with items that are in demand. By successfully controlling inventory, the company has a realistic estimate of inventory stock costs. Focus on a seamless transition of product delivery and shipment from and to the warehouse.
Many companies have inventory fluctuations throughout the year. Through inventory analysis, these peaks and troughs can be anticipated. Preparing for these cycles helps companies avoid the overstocking or understocking of raw materials or finished products. Effective inventory management should eliminate the frequency of rush ordering of depleted materials. A small, manageable cushion should be considered to accommodate these types of annual production swings. This allowance enables operations to process orders without interruption, and acquiring merchandise in bulk provides a beneficial savings for the business.
Inventory managers are responsible for storing inventory so the quality of the stored material is preserved. Proper maintenance of inventory prevents losses due to theft, damage or corrosion. Understand the storage requirements of the inventory procured. Confirm that these items are delivered in a way that minimizes damage to the product en route.
Most corporations employ inventory software to help them keep records of inventory and to evaluate restocking thresholds. Faulty items or returned merchandise should be well documented and removed from the quality inventory stockpile. Record keeping should constantly be in communication with accounting, and regular reconciliations should be performed. This will keep the business’s finances in line with details of inventory turnaround and costs.