The process of moving items through a business via a consistent cycle of ordering, storing, producing, selling and replenishing goods is what we refer to as inventory management. It is vital for establishments of just about any kind to conduct an inclusive stocktake at least once a year.
Depending on your business, your position within the organisation, and the sort of item being maintained, inventory management can be complicated. Making decisions on how to organise and manage inventory requires teamwork and involves trade-offs, risks, and benefits. Let’s take a look at what inventory management is.
Inventory Management Broken Down
There are typically 3 vital aspects that make up inventory management. A business buys inventory to begin with, which is generally when products that are ready to sell are bought and delivered to the warehouse or right to the point of sale. Then inventory is held in storage until it is needed. Materials or goods are moved across your fulfilment network until they are prepared for shipping. Finally, the quantity of goods available for purchase is regulated and orders are filled by pulling finished products.
To guard against unforeseen fluctuations in supply and demand, almost all businesses keep safety stock inventories. In this sense, inventory serves as a safety net against the unforeseen and a stopgap measure for production.
The Importance Of Inventory Management
Lack of inventory can cause stock-outs, which can be detrimental to a company, especially if customers have options, like e-commerce businesses where quick fulfilment is necessary. Stock shortages cost money and might erode customer loyalty.
The most valuable asset of a business may be its inventory. Where all the components of the supply chain come together is in inventory management. Unhappy consumers may result from having insufficient merchandise when and where it is required.
But a sizable inventory comes with its own risks, including the cost of storing and insuring it as well as the possibility of spoiling, theft, and damage. Businesses with intricate production and supply networks must strike the correct balance between having too much inventory on hand and not enough.
Overall, inventory management is a vital aspect of business operation and can be extremely problematic if overlooked. We hope this breakdown of inventory management and its importance has offered you some insightful guidance.
