Inventory is one of the most important aspects that organizations need to manage to achieve their organizational goals effectively. It concerns the management and coordination of the movement of stock from production to storage, with a final destination of use by the customer. Apart from ensuring stock availability, efficient inventory management contributes to reducing costs and thereby boosting revenues. In this article, we will discuss a few of the most effective methods of inventory management that can be adopted by various enterprises.
ABC Analysis
The most widely used technique for classifying inventory is the ABC analysis. It is categorized as one of the simplest techniques used in inventory control. This method categorizes inventory items into three groups based on their value and importance:
- A category: High-valued items that have a great impact on revenue.
- B category: Moderate-valued items that have a moderate impact on revenue.
- C category: Low-valued items that have a small impact on revenue
This way when inventory is classified, the business can be well organized for more control to be offered to valuable inventory and less control concerning non-valuable items can be provided.
Just-In-Time (JIT) Inventory System
Another successful practice that has been exercised to build on the concepts of just-in-time inventory is called the just-in-time inventory system with a focus on the no-stock component. Thus, using this strategy, the business enterprises do not manufacture and order a large number of stocks in a bid that supply and production only happen when required to eliminate certain costs associated with inventory and the dangers of holding on to outdated stocks.
Vendor-Managed Inventory (VMI)
Vendor-managed inventory is one of the concepts of partnership management where the role of managing the company’s finished goods inventory is left to the supplier. This technique helps an organization to lessen the costs of storing material or bulky stocks and at the same time placing those stocks in the market. It means balance between the business and its suppliers and this cannot be brought into play without confidence.
Cycle Counting
Cycle counting entails the physical counting of only a few products at once, rather than the entire range of products over a short period. If these records are not scrutinized consistently, then stockouts and overstocking are frequently realized. This technique enhances the regular checking of record differences, thereby ensuring they are corrected steadily.
Use of Technology
These developments have significantly affected most of the operations within organizations, including the methods used in handling inventory. Managing stock entails processes like inventory tracking and analysis and demand forecasting, which can be eased through the use of inventory management software among business organizations. Besides, relocating materials and equipment can be easier when barcodes or RFID systems are installed for inventory organization.
Conclusion:
As a result, the above techniques play a central role in successful inventory management; nonetheless, the application of a good Order Management System (OMS) is crucial. From the order receipt to the delivery of products, an OMS consolidates data, manages functions, and offers real-time tracking of stock in the organization. When a company employs correct inventory management practices coupled with a sound order management system, there is increased efficiency, realized savings, and consumer satisfaction.
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