How Can You Avoid Inventory Management Mistakes?
Inventory is a very important asset for any business.
Managing it well helps prevent issues that could contribute to profit loss or operational disruption.
What is Inventory Management?
Inventory management is a system that ensures production and consumer demands that are met throughout the process of ordering, storing product sales, and managing stock and raw materials.
It involves monitoring the conditions of products and their qualities before moving to the supply chain and also streamlining inventories to avoid shortages.
Main types of Inventory :
Inventory can be categorized into four types:
Work in progress.
Maintenance repair and operations.
Raw materials : Vegetables, meat, wheat, and other unprocessed items all fall under the raw materials category.
You might also know it by another name “Feedstocks”.
Work in Progress inventory or WIP : Just like its name, work in progress.
Items are products that aren't yet ready to be sold or served.
These items might be spices or garnishes any raw materials or labor that contributes to the finished products.
Maintenance, Repair, and Operating Supplies Inventory or MRO :
Inventory often refers to the machinery and tools used for repair.
They are essential to keep a business's production line running.
Finished goods :
The fourth inventory type is any finished goods that will be served or sold to customers.
Why is Inventory Management Important?
Inventory management has many moving parts, and different categories can be challenging to maintain.
It requires good recordkeeping to ensure the overall production process runs smoothly.
Here are some of the major challenges :
Overstocking or understocking of goods :
This is when a store has more or less product than what they need to sell.
Having too much stock can lead to profit loss, while not having enough could mean missing potential sales.
Inefficient inventory visibility :
It's important to track inventory on a consistent schedule, from tomatoes and carrots to napkins and uniforms.
This will help inform how quickly ingredients and supplies are being used and assist in future buying decisions.
Inability to Determine Market Demand :
Estimating supply and demand is essential for businesses.
For example, a restaurant owner will want to seek out markets where there is a high demand, increasing the chance for more potential customers and sales.
Supply Disruptions :
The supply chain can be disrupted due to unforeseen circumstances.
It could be because there is a shortage of raw material from the suppliers or when workers go on strike.
Therefore, it's important to manage the safety stock inventory well to make sure you have a buffer for unexpected cases.
It’s very hard to manage all these things on paper.
Nowadays, businesses can achieve both quality and efficiency in inventory management by using the right tools.
It's possible to digitize your processes within Precision Systems POS, so you can establish good inventory recordkeeping and track price progress and accountability all in one place anytime and anywhere !!