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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