In the manufacturing environment, inventories represent a significant portion of the company’s capital. Therefore, the organization must ensure that the suitable goods are in the right place at the right time to avoid potential inventory, prevent inventory pollution and that organizational processes are working correctly. Therefore, stock management is considered essential for the organization to manage potential inventory imbalances and the resulting operational issues.
Inventory management can be described as controlling inventory acquisition, managing inventory and availability to ensure the optimal inventory level in an organization. This is also seen as an internal control measure, a procedure to ensure work efficiency or to avoid internal fraud and error.
Inventory control deals with three types of inventory.
1. Raw materials
2. Work in progress
3. Finished products
What Is Inventory Management?
Inventory management is a concept that focuses on the value of inventory as an added value, so inventory is managed to maximize the value, exposure, and profit of the organization. It is a comprehensive process involving product range utilization, product placement decisions, product speeds and speeds calculation, etc.
Inventory management is a way to adjust the storage space in a company’s warehouse. This includes ensuring that storage situations are not experienced and what and how much is stored. Inventory management should also ensure that all products remain usable.
What Is Inventory Management System?
Inventory tracking and management are identified as a stock management system, which can be manual or digital. warehouse management system is a software which helps businesses in terms of stock and inventory management. Numerous technologies are used in these software’s namely, barcode scanning, or RFID technology.
The system also helps in forecasting of the inventory, which then leads to a better approach on what to order, when to order and how much to order so that enough stock is maintained without stock poisoning.
The following techniques can be used to ensure a better management and workflow in inventory management for small businesses.
Inventory Management Techniques
Almost every business organization has used different stock management methods to conduct their inventory audits. These are commonly used.
1. ABC Analysis
This stock management system is based on Pareto theory, which shows that 80% of inventory consumption costs are based on 20%. This technique ensures a classification of inventory into several categories which are,
After classification, other efforts are made for many inventory categories according to dependency value criteria. Thus, vital control initiatives for Class A sites, reasonable oversight of Class B sites, and less management of Class C sites are guaranteed.
2 . VED Analysis
VED refers to the viral, the essential, and the desirable. Unlike classifications based on ABC analysis, inventories are classified based on the criticality of inventory data. This Class V group has many necessary stocks, while Class D goods do not have to be in stocks every time.
3. FSN Analysis
FSN analysis stands for fast, slow-moving and stationary. This classification is done on the basis of the company’s storage.
JIT technique means Just-in-time. As the name suggests, JIT is a stock management technology that focuses on the concept that only when orders are placed are inventories requested for each other.
5. Use Of Data
The availability of real-time data and analysis can result in a massive benefit for the company. This data can be used to determine future sales, profits and many important things that cannot be defined directly.