Importance of Inventory Management in the Supply Chain Industry
Inventory is crucial for all businesses and organizations it does not matter which business you are in! Without inventories, the business will not work efficiently. When inventory is important then management of inventory is also essential in all business sectors. Inventory management is important for the supply chain industry as well.
What is inventory management?
Inventory management is the process of managing inventory at the right level in the right place. It is the management of the products to sell material in order to make profits. From the prospect of the supply chain, you have to look at several aspects such as controlling inventory, purchasing raw material from suppliers, maintaining the stock at the right level in the right place at the right cost, and ensuring that customer requirements are met.
Mainly inventory management process includes three parts purchasing, storing, selling inventory, and earning profits.
Inventory can be divided into 3 categories raw material, finished goods, and MRO parts (Maintenance repairing operation).
Managing inventory might seem simple but it is hectic!
For effective inventory management, inventory management software is significant as it can be very helpful by eliminating manual management of work.
With the inventory management software, you can maintain a list of spare parts, consumables, or other inventories. Add or move inventory from one place to another, this feature comes in handy when you have a lot of inventories located at different-different locations.
When there is a lot of inventory, how many exactly are left in stock is exhausting work and how much you need in the next few months. As we are saying from the beginning managing them is no simple job. But with inventory tracking software, you can keep track of inventory numbers left in the stock.
What are the benefits of inventory management?
The benefits of inventory management are as follow:
- Avoid the risk of overselling
- Accurate inventory tracking
- Avoid overstock & out of stock issues
- Cost-saving
- Detail reports providing insights
- Enhanced productivity
- Better customer service
According to Global Market Insights, “Inventory Management Software Market size crossed USD 3 billion in 2019 and is estimated to grow at a CAGR of over 5% from 2020 to 2026.”
What are the issues the supply chain industry faces? How inventory management software helps them in overcoming those problems?
Below we have mentioned challenges the supply chain industry faces and how inventory management software helps in overcoming those problems:
Avoiding overstocking – one of the biggest issues for the supply chain industry because is overstocking they think that they will manage inventory but inventory quality decreases after some time. When you purchase raw material in huge quantity and if it is not finished on time loss can occur due to overstocking.
Solution – With the inventory management software you can calculate the actual number of inventories you will need in the next few months. Therefore, you will only purchase that you can finish in a particular period of time. For this purpose, data is analyzed by software so that they can know an accurate number of inventories required.
Avoiding understocking issue – Understock issue shall not be taken lightly. It can result in customer loss and in the supply chain industry, even customer loss can be huge! Therefore, every customer must be given product delivery on time. But the problem arises when you find that sufficient inventory is not available in stock for customers. Late delivery of inventory means disappointment and unsatisfied customers. We know the customer also has some plans for inventory but their plans are delayed because of mismanagement of understocking.
Solution – The solution is inventory management software’s alert and re-order feature. Alert feature provides you a real-time number of inventories and reminds you when inventory is below a certain defined inventory number. After which you can start the refilling process of inventory.
Inaccurate tracking – Using a manual spreadsheet for tracking inventory is not inaccurate but also time-consuming. Moreover, bookkeeping pages is tedious, repetitive, and powerless against blunders. Indeed, even independent small organizations and ventures can profit from effective inventory management software. Furthermore, organizations need to know where exactly inventory has reached for instance receiving or sending inventory when it was shipped, where it has reached and when it will be delivered!
Solution – Effective inventory management software is accurate it lets you know the accurate location of each inventory and the manual spreadsheet is eliminated. Since all the process is automated error chances are reduced.
This software is centralized so it keeps track of inventory that is sent out of premises or inventory that is about to come into premises. Centralizing information allows the manager to update their client as well about the delivery where it has reached and when it will be delivered.
Conclusion – There is no doubt that inventory is a critical part of any business. For the management of inventory, asset or inventory management software is essential. As we told above how this software can assist supply chain organizations in several ways.
However, there are several other benefits as well. It can provide reports that can in tracking digital trends that can help in keeping yourself ahead of the curve. Reports are also helpful in making a crucial decision based on solid numbers & not just based on assumptions.
You can also avoid asset or inventory theft with software as this software utilizes asset tracking technologies such as barcode QR Code (Quick response), RFID (Radio-frequency identification). These technologies come in the form of inventory tags & labels these labels are stickered to the inventory and provide real-time location.
If you want to grow your business and want to take your business to a new level then this software is mandatory.
