7 Effective Techniques for Inventory Management

Inventory management is controlling the stock or procurement and distributing all goods or materials from suppliers to manufacturers. or from the producer to the consumer. Therefore, inventory management refers to a set of tools or methods used to control, track, sort, or ship inventory or stock. The company will pool a large amount of capital. (if not more than half) in inventory 

Therefore, it is necessary to establish effective inventory management to ensure that the right amount of data is maintained. Other effects on cash flow are evident in small businesses, where businesses hold little or no stock. Therefore, it creates a situation where customers cannot get the products they want. If it becomes too much, the company may close the market or store. Inventory management approaches come in handy here.

Business managers may retain ideal inventory counts, eliminate human error, save costs on physical inventory stock, and more with the correct inventory control systems. Let’s look at 12 of the most popular inventory strategies nowadays. These are incredibly effective methods for improving inventory control in your organization.

Minimum Order Quantity

The minimum order quantity is the lowest quantity of inventory that the suppliers will provide. This means that if you cannot make the MOQ for a certain product, then you will not be in a position to buy the product from that seller. 

Suppliers employ minimum order amounts to improve profitability while reducing “bargain shoppers” and clearing out excess inventory.

The minimum order quantity is determined by adding your total inventory cost plus any additional expenditures you must pay before attaining profit. As a result, MOQs assist wholesalers in being profitable and maintaining consistent cash flow.

Just-in-Time Inventory Management

Just-in-time Inventory management is the process of producing what is necessary when it is required in the quantity. Many businesses use a just-in-case Inventory management strategy for keeping a small amount of stock on hand for demand increase.

By generating goods-to-order, just-in-time inventory (JIT), management strives to build a zero inventory system. It works on a pull mechanism, where an order comes in and triggers a cascade response across the whole supply chain. This alerts employees to order inventory or begin production of the products.

Also Read:- What Are Distribution Services and Their Benefits?

ABC Analysis

ABC inventory analysis divides your inventory into three groups based on how much it costs to keep and how well it sells.

A-goods are the best-selling goods that don’t take up much warehouse space or expense.

B-things: These things sell frequently but cost more to store than A-items.

C-Items: The remainder of your inventory, which accounts for the majority of your inventory expenditures yet contributes the least to your bottom line.

Using ABC analysis reduces your working capital costs. It identifies which things you should replenish more frequently and which items you don’t need to store as frequently. ABC analysis improves inventory turnover and lowers outdated inventory.

Material Requirement Planning ( MRP )

Producers use the Material Requirement Planning Technique to make inventory orders after forecasting sales. The MRP system integrates data from many business areas where inventory is present. Based on the knowledge and market demand, the manager would order new inventories from the material suppliers.

Batch Tracking

Batch tracking is also known as lot tracking. It is a method of effectively tracing items along the distribution chain using batch numbers. Whether it’s raw materials, batch tracking allows you to know where your products come from, where they will go, and, if they have an expiration date, when they expire.

This inventory management system has several advantages, including:

• Improved supplier relationships
• Quick and simple recall
• Streamlined expiration tracking
• Fewer accounting errors due to manual tracking

Safety Stock Inventory

Safety stock inventory management refers to the buying of extra stock in an organization’s warehouse in case they do not have enough to order more. This contributes to avoiding stock-outs. Businesses normally experience issues as a result of wrong demand estimation or sudden shifts in demand.

FIFO and LIFO

LIFO and FIFO are two methodologies for calculating the cost of products. 

To keep inventory fresh, FIFO, or first-in, first-out, assumes older goods are sold first.

LIFO, or last-in, first-out, posits that newer inventory is normally sold first to avoid spoilage.

The Last Word

Inventory management is essential if you want to compete and give your customers the experience they want. Whether you are a brick-and-mortar store, internet, or multi-channel store. If you don’t use an inventory management process You’ll never get ahead. Sign up for inventory software that will teach you the basics of inventory management and act as a catalyst for your growth.