Inventory Management

Inventory is a primary part of many of today’s businesses. Essentially, inventory is the storage of products that are sold to consumers to help the business make a profit. Further, in some instances, inventory also includes what the company uses to keep the business up and running—for example, storage for cleaners would be considered inventory for a business that focuses on the business of cleaning.

There are several different forms of inventory and any business may rely on one or more forms of inventory. First, there is inventory referred to as materials and components: this type of inventory is the storage of different parts to manufacture larger products. For instance, a car manufacturer will have steering wheels or brake pads in their inventory, ready for use when needed to add to a car they are manufacturing. Likewise, a web designer may have a variety of software applications that help them create innovative websites. Yet another example of material and components inventory can be seen in a restaurant: restaurants have food in their refrigerators and freezers to later cook and serve to their guests.

Another form of inventory that a business may have are products that are ready for sale. For instance, some businesses buy their products from manufacturers and store them in warehouses: such facilities will require warehouse management of inventory. Such products are ready for sale immediately and require no assembly—toys, household items, furniture, and office supplies are just a few of many items that can be part of a ready for sale inventory.

Whether a business is storing products for later use or they are storing parts to later use in the creation of products, the business owner must always know what they have on hand. In not knowing what one already has there is no way the business will function properly. Mismanagement of funds, profit loss, and theft are some of the most common consequences of poorly managed inventory.

Regardless of the form of inventory that a business has, inappropriate management of such inventory can result in over ordering of stock, under ordering, and loss. Mismanagement of inventory in a warehouse or in a business can even result in theft: items from storage can be stolen without the knowledge of the business owner if the inventory is not properly tracked.

If a business owner does not know what they have in storage they can end up over ordering stock. If the stock is perishable, the items that are in storage may go to waste and cost the business owner funds that can be put to better use. Also, overstock of nonperishable items is no better: having too much stock can result in poor storage space and the need for additional storage for unnecessary stock. Since, in most instances storage space is a valuable asset and may even cost the business money in terms of rental space, the use of storage space must be utilized efficiently.

Under stock of inventory can result in unhappy consumers or poor production time. Imagine a business that does not have all the parts it needs to fill orders in a timely fashion. Further imagine a business that has to stop production to wait for parts to arrive at their warehouse—not much work would be completed and those who order products will be completely unsatisfied with the business’s service. Now imagine a business that advertises certain products on sale and does not have enough of the item in stock to meet customer demand—again, unhappy and dissatisfied customers are the result.

Interestingly, good inventory and warehouse management can put an end to such issues and ensure that a business runs smoothly. In essence, inventory management is a vital measure in almost every business endeavor—businesses can keep adequate track of losses to be claimed during tax time; can keep over stock, under stock and theft to a minimum.

When a business owner takes advantage of inventory management solutions they will immediately see the benefits of such solutions. Businesses that have firm control of their inventory know their business value, their product worth, what products they will need in the future and precisely how much product to order. Businesses that have an understanding of their inventory also find that they are never in need of additional storage space (unless the business itself expands) because they manage existing space with efficiency. As a final point, inventory management and proper warehouse management puts business owners in a position in which they know what they have lost in the event of theft, vandalism, or some other unforeseen incident arises: knowing the value of inventory ensures that the business owner will be eligible for more accurate reimbursement from the insurance company.

In addition to the latter mentioned benefits above, there are a number of other benefits that business owners can derive from implementing appropriate inventory management measures. First and foremost, every business owner must be prepared for unforeseen events that can result in tremendous loss. For instance, if a business should suffer damage as the result of a fire or as the result of vandalism, the business owner is going to want to make an insurance claim. If the business owner is not fully aware of what they have in their inventory they will not be able to file an accurate claim.

Having a good hold on what inventory is present, business owners can also make reordering products simple. Reordering is far more efficient when business owners can determine at a glance or at a quick count how much inventory they have. By subtracting the number of items sold or used from the initial inventory, the business owner can then calculate how much product needs to be ordered.

Knowing the value of a business helps the business owner to determine the overall success of a business. In truth, just as basic assets make up part of the business’s worth, so does the inventory that a business holds. In order to understand the complete value of a business, a handle on warehouse management and inventory is important.

As mentioned earlier, another benefit derived from good inventory measurement can be identified in the fact that business owners can better meet the demand of the consumer. Yet, this benefit has a long-term advantage as well: when a business provides a customer with the services or products they need with efficiency and immediacy, the business will gain the loyalty of the consumer. Moreover, that loyalty, via word of mouth can turn into successful advertising. The business then gains new clients and customers because of the outstanding service they provide. As a final point, more customers means a direct increase in the business’ bottom line.

In conclusion, another factor that every business owner must consider is the cost to insure inventory. Let’s face it; the bigger the inventory the higher the premiums are for insurance. Paying out additional funds for inventory can prove rather costly in the long run. Again, to save businesses money, good inventory and warehouse management are a must.

There are several measures that businesses can use to effectively keep their inventory under control. A few simple steps is all that is needed if a business owner wants to take full control of everything they have stored. First, the business owner will need to do an initial count of everything in stock. The count of all items in stock should be completely documented as well as all items that are ready for sale. A recount can ensure accuracy. This will give the business owner a starting point for inventory tracking. At this point, it may prove to be an advantage for the business owner to use some kind of inventory tracking software application.

Next, when new inventory is added to existing inventory, the first thing a business owner should do is to check it for quality. Are any of the items dented or damaged? If so, they will need to be returned so that the business can get appropriate credit—damaged items do no good sitting on storeroom or warehouse shelves. Next, the new inventory should be added to the count of the existing inventory, particularly in the business documentation. This will help the business owner to keep an adequate count of what is in stock.

When ordering it is advised not to over order or to under order stock; however, this does not mean that the business owner shouldn’t take full advantage of what’s available to them in terms of sales and discounts. If items bought in bulk are less expensive, it is sometimes a good idea to purchase them that way. Essentially, the business owner will need to make a judgment call and take the perish-ability of the product into consideration.

When ordering stock it is important that a business owner does not substitute quality for quantity. In other words, cheap inventory is not necessarily good inventory and buying less expensive products to increase one’s inventory could result in profit loss. No matter what measures of inventory control that one puts in place, it’s always imperative that quality products remain the first and foremost concern of the business.

Getting the right amount of inventory is going to require a bit of speculative projection on behalf of the business owner. The business operator is going to need to guess how much they think they may sell in the coming months in order to order the amount they need. By tracking inventory on a weekly or monthly basis, the business owner will be able to identify predictable patterns of product use and sale. They can then base their ordering process on such predictions. The end result is that over stock and under stock of inventory is minimized.

Diligent and regular tracking of inventory is recommended at all times. Further, when counting inventory in a warehouse or business location it is imperative that all counts are accurate. What good is inventory tracking if the calculations are all wrong? Essentially, inaccurate calculations of inventory result in significant losses of time and money for a business.

As one can see, inventory tracking can prove to be a full time process in and of itself. What is a business owner to do when it comes to inventory tracking? It is quite clear that adequate tracking of inventory is necessary for the proper operation of the business. With so many other things that the business owner is responsible for how will they manage the time for inventory control? Small inventories are usually fairly easy to manage, but what about warehouses and larger supplies?

Since inventory management is not a process that can or should be avoided, it may be a good idea for business owners to hire someone to be responsible for large inventories. Often times, the duty of inventory management is handed over to the control of a manager. The manager is responsible for weekly or monthly stock counts and for ordering and reordering products. This allows for the business owner to focus on other aspects of the business’ operation.

Inventory software applications can help to monitor how much inventory a business has. Such applications allow the business owner to document, calculate and, in some instances create new orders for stock. Thus, software applications may minimize the amount of time spent handling the inventory.

As a final point, a lot of businesses out source their inventory management needs—they hire another company to come in a handle their inventory. While this may cost the business some money, many business owners find that another company can proficiently manage their inventory and can save them money in the long run. Basically, the business owner will have to decide what measures best suit their inventory tracking needs.

What kind of inventory software applications are available? A lot of businesses use barcode software to keep track of their existing inventory. In addition, barcode software can keep track of all items that are sold. Businesses often like barcode inventory software applications because such applications can also minimize human error—since product pricing is added to the application, when a product is rung through the register it is never punched in for the incorrect price. Also, barcode recognition software allows business owners to have an easy management system for special discounts and sales of the products they handle.

Barcodes can be read with special wands or machines and they make the process of inventory simple: items that are sold can be automatically subtracted from the existing count. Some software applications automatically create and print a reordering document. Still other barcode programs allow for electronic submission of orders.

In contrast, a business owner may want to invest in a software application that merely allows the business operator to document, log, and calculate inventory. Some programs will also make projections for the business owner so that they will know precisely how much product to order when it comes time to restock the inventory.

Inventory consulting is another option that business operators take advantage of in their effort to get a handle on their stock. Hiring inventory consulting professionals has a number of advantages. One benefit can be found in the fact that inventory-consulting professionals take the entire and sometimes daunting task of inventory management off the hands of the business operator. Also, business owners like the idea of having one or more individuals come in to handle inventory counting and monitoring—it saves the business owner additional costs in time and labor.

Inventory consulting agencies document everything for the business owner and will further back up such documentation. In the event that the business suffers from vandalism, fire or some other catastrophe they will still have a complete record of the inventory assets they held. This ensures that the business will not suffer more loss than it already has and it will also insure more adequate and accurate insurance claims.

Within moments, an inventory-consulting agency can provide a business owner with a complete print out of their current inventory. Thus, business owners have access to vital business documents and they information they provide. When it comes time to insure the business or to run an inventory check, a business owner can feel confident in knowing precisely what they are expected to have.

As a final point, some inventory consulting agencies will actually handle all of the ordering for the business. While this may seem like too much control to give to another agency, some business professionals like they idea of relying on a company to manage inventory. It leaves the business operator free to manage other aspects of the business.