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What is an inventory management system?

 


An inventory management system (or inventory system) is the process by which you keep track of your products throughout your entire supply chain, from purchase to production to final sales. It governs how you approach inventory management for your business.

Each company will manage stocks in a unique way, depending on the nature and size of their business. Let's take a look at a simple example.

Inventory management system example

Carlos starts a business selling food baskets. He has several suppliers that sell him food in bulk, some of which must be divided and repackaged.

Carlos creates an Excel spreadsheet, which he updates each time he asks for more shares, builds a basket, or completes a sale. This is his inventory management system, and it is completely up to him to know how much stock he currently has, when food products can expire from him, how many baskets he can sell, and more.

Why you need an inventory system

Any company managing stocks will need a system to accurately track and control them. Without one, he will be working entirely on an ad-hoc basis, and he will quickly run into situations where his business is overstocked or out of stock.

Inventory systems tell you how many components or ingredients you need to create or assemble your final product. Without this information, he may end up with overstock, eroding his bottom line, or insufficient inventory to meet customer demand.

But while you will need an inventory management system, which one you choose is entirely up to you. There are countless different systems you can adopt, ranging from simple approaches to comprehensive solutions.

When to update your inventory management

Moving to a dedicated inventory solution can provide huge benefits to your business, but it is a sea change. Here are some signs that it might be time to upgrade.

You need more flexibility

Spreadsheets are an inflexible way to manage inventory. If you find that you need to add additional sheets to your solution, or are struggling because employees can't access real-time data, then it might be time to upgrade to cloud-based inventory software.

You need more precision

Difficulty keeping track of how many of a particular item you have at any given time? With a dedicated solution, you and your employees can get up-to-date information on your inventory anytime, anywhere.

 

Inventory costs are growing

Maintenance costs can seriously undermine your bottom line when left unchecked. The key to minimizing maintenance costs is to store all the stock you need. An efficient inventory management system helps you keep your warehousing efficient.

Slow growth

Maybe your salespeople have to contact your warehouse to find out what they have to sell, or you find yourself spending too much time writing reports manually instead of focusing on your customers. Slowing sales can be a symptom of poorly managed stock - dedicated software can help you get back to growth quickly.



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