Importance of Warehousing & Inventory Control
Warehousing and inventory control systems help a business monitor and track the amount of raw materials, finished goods and work in process the company has on hand at all times. Businesses rely on the information in the inventory control system to make decisions on stock purchases, production schedules and warehousing needs. Accurate inventory systems help small businesses keep costs low and efficiently deliver products to meet customer demand.
Inventory control systems monitor quantities, but businesses can also use the system to track lot numbers of raw materials and finished goods. Tracking lot numbers allows the business to track materials through the production process. When a company detects quality problems or defects, the tracking system allows the business to isolate materials and finished goods that may contain the defective material. Tracking systems also allow businesses to work with vendors to identify defective materials.
Inventory control can also allow businesses to monitor the shelf life of materials. Businesses that use an inventory control system can ensure the company uses materials on a rotating basis according to expiration dates. The inventory control and warehousing system must provide an efficient method for workers to identify and pull older stock before its expiration date.
An effective inventory control system is vital for purchasing activities in a business. Buyers rely on accurate inventory data to determine when it is necessary to purchase stock and raw materials. When inventory information is inaccurate, buyers may purchase an excessive or insufficient amount of materials. Inventory control systems may use triggers that signal the buyer that it is time to replenish the company’s stock. Inventory levels are one trigger buyers use to determine when to purchase additional stock. The inventory level is the amount of stock the company keeps on hand at all times. The business may use usage data and the amount of time it takes to receive replenishment stock to set the inventory level. When the quantity on hand reaches the inventory level quantity, the buyer purchases additional stock.
Having an insufficient amount of stock to meet customer demand can result in late deliveries and lost business for a company. Purchasing excessive inventory wastes warehouse space and ties up a business’s funds.
The inventory control and warehousing system a business uses also tracks finished goods, which the shipping department uses to track and store finished products. A quality warehousing and inventory control system allows the shipping department to ship products to customers efficiently and in a timely manner.
Storing raw materials and finished goods incurs a cost to a business. The inventory control and warehousing system can help manage the cost by controlling the amount of materials the business must keep on hand. Some businesses use a lean system, having a minimum amount of stock on hand to keep the cost of inventory and warehousing low. A company with a lean inventory system only purchases materials when there is a customer demand. Lean inventories minimize the cost of raw materials, warehousing and material handling. However, delays in shipments from vendors or unforeseen increases in customer demand can result in late deliveries or lost business for a company that uses a lean inventory system.