MANAGEMENT OR CONTROL – WHAT TO CHOOSE FOR INVENTORY MANAGEMENT?
Inventory management includes your supply chain, manufacturing, delivery, sales, and reporting, among other things. Before gaining control, almost any company will need to set up an inventory management system. Otherwise, it will be difficult to manage your suppliers, production, or sales.
Following that, you have a variety of alternatives for better storing and selling your stuff. Whether you prioritize purchasing, control, production, or sales is entirely up to you. For example, depending on your previous operating experience, you may want to make adjustments such as changing how you count stock. Alternatively, you may want to change procedures to account for changes in product and order profiles, customer gains and losses, or demand swings.
MOST EFFECTIVE TECHNIQUES IN INVENTORY MANAGEMENT
Inventory management is only as effective as how you use it. Having the software’s creators set up inventory management is well worth the extra effort and money. Work with them to ensure you’re using the suitable approaches and features to obtain the best results.
Let’s look at some inventory-control strategies you could implement in your warehouse.
ECONOMIC ORDER QUANTITY
The Economic order quantity, or EOQ formula determines the best order quantity for a company’s inventory based on the total cost of production, demand rate, and other factors.
The overall purpose of EOQ is to reduce related costs as much as possible. The formula is used to determine the most significant number of product units to reduce purchasing. The formula also considers the number of teams in the delivery and storage of inventory unit costs, which helps most businesses free up locked cash in inventories.
MINIMUM ORDER QUANTITY
Minimum order quantity (MOQ) refers to the smallest amount of fixed stock that a supplier is willing to sell. If retailers cannot meet a product’s MOQ, the supplier will not sell it to you.
Inventory products that cost more to produce, for example, often have a lower MOQ than inexpensive things that are easier and more cost-efficient to supply.
To locate goods that significantly impact overall inventory expenses, this inventory classification method splits subjects into three groups.
- Your most valued products are in Category A, and they contribute the most to overall profit.
- Products in Category B lie in between the highest and least valuable.
- Small transactions that are crucial for gross profit but don’t contribute as much to the organization fall into Category C.
JUST IN TIME INVENTORY MANAGEMENT
JIT inventory management is matching raw material orders from suppliers with production schedules. JIT is a suitable method for reducing inventory costs. Instead of ordering too much inventory and risking deadstock, businesses receive the product as needed. Before being removed from sale status, the dead stock is goods never sold or used by customers.
SAFETY STOCK INVENTORY
Extra inventory is ordered beyond predicted demand, known as safety stock inventory management. This method is designed to avoid stockouts, usually caused by inaccurate forecasting or unanticipated changes in consumer demand.
Batch tracking is a quality control inventory management tool that allows users to organize and track material with comparable characteristics. This method helps monitor inventory expiration or trace damaged items back to their originating batch.
You’re right if you’re thinking of your neighbourhood consignment shop.
Consignment inventory is a business transaction in which a consignor (vendor or wholesaler) agrees to give their items to a consignee (retailer such as your favourite consignment store) without paying for the inventory upfront. The inventory is still retained by the consignor who is selling it, and the consignee only pays for it when it sells.