Inventory management is the set of processes that define the lifecycle of inventory for a business. It includes ordering, storing, and utilizing the goods. Proper management of inventory ensures time-saving, improved productivity, and cost reduction for businesses. Effective inventory management ensures the availability of the right amount of inventory (stock) at the right place and at the right time!
Businesses face numerous challenges in inventory management, including overstocking, understocking, picking of wrong items (mispick) from the warehouse, inventory tracking issues, deadstock management, backorders, managing peak load phases, supply chain deficiencies, and more. Such issues consume considerable time and money for businesses.
Like many other business processes, technology and automation have revolutionized inventory management too. Businesses today are witnessing a considerable upsurge in ROI (return on investment) by leveraging the top inventory management software. The software helps streamline various inventory management operations by resolving the above challenges. A study by GMinsights suggests that the inventory management software market size will rise to USD 5 billion by 2026.
Demand forecasting, warehouse management, logistics management, supply chain management, and data management are crucial elements of inventory management. So, the best practices of inventory management focus on improving these processes!
Top Inventory Management Practices for Your Business
Here are some simple inventory management trends, techniques, and tricks to boost your business profits.
1. Adopt Inventory Management Software
Inventory management is a complex process. When done manually, businesses suffer challenges due to delays in data access and updates. Moreover, with the large volumes of data involved in inventory management, the manual process is also prone to human errors. The inventory management software offers various tools needed to manage your business better. Automating the inventory management process using the best inventory management software helps businesses/companies save time and improve accuracy by eliminating human errors.
Besides, online inventory management systems allow real-time access and updates of inventory data. The best inventory management software tools offer valuable insights for enhanced inventory management by providing the key inventory management metrics, including inventory turnover ratio (ITR), stock-to-sales ratio, backorder rate, sell-through rate, rate of return, cost per unit, and many more. These benefits collectively result in significant cost-saving for businesses.
2. Implement Just-in-Time Management Methodology
A widespread and well-known inventory management practice is the just-in-time (JIT) methodology. This concept involves receiving the needed goods strictly when required and in the required quantity. It requires careful planning to ensure that the stock is neither received early nor late.
JIT reduces inventory costs and wastage. For example, Toyota Motor Corporation leverages this methodology to successfully and profitably produce cars by ordering the automotive parts only on receiving new orders. Similarly, many popular laptop vendors provide made-to-order laptops by implementing JIT.
3. ML-Based Demand Forecasting
Accurate demand forecasting is the crux of effective inventory management, but this is the most challenging task in the process. Today, with the help of machine learning (ML), it is easy to forecast the demand for inventory accurately. Most of the top inventory management software applications facilitate ML-based demand forecasting. This tool helps businesses plan and maintain the perfect inventory and safety stock volumes, neither less nor in excess.
ML helps analyze customer behavior and sentiments from past data and predict future demands accordingly. For example, ML-based inventory management software can analyze the frequency and pattern of searching for a particular product and provide information about the increase or decrease in the need for a seasonal product beforehand. With enough data available, ML-based demand forecasting gets more precise with time.
4. Analyze and Improve Your Supply Chain
To accomplish perfect inventory management for your business, it is equally important to understand and streamline your supply chain management. You need to analyze the various critical points or elements in the supply chain through past data to determine the weak links or deficiencies that affect the efficiency of your supply chain. Also, focus on supply chain security. These factors have a direct impact on the success of your business inventory management.
Modern comprehensive inventory management systems typically provide tools to better control the supply chain by offering a common platform to maintain and share the inventory and supply chain data for your business.
5. Focus On Quality Control With Batch Tracking
Quality is the root to business success. Another best practice in inventory management is ensuring quality through batch monitoring and tracking. Batch tracking enhances visibility/traceability and reduces errors in inventory management operations.
With automation, it is easy to record the batch information and expiry dates of stock. Monitoring the batch information routinely helps discard the expired stock timely and saves inventory costs besides ensuring quality. Moreover, software-based batch tracking enables easy implementation of smart inventory management strategies such as LIFO (last in first out), FIFO (first in first out), and FEFO (first expiry first out).
6. Mobile and Cloud-Based Software Are Trending
Mobile apps for inventory management enable quick inventory data access/updates. The employees and other business stakeholders can use these apps anytime and anywhere, even when they do not have access to desktops. These apps ensure better accountability among the staff, uninterrupted inventory management, and better business performance.
For perfect inventory management, businesses must adopt cloud-based mobile-friendly inventory management applications as these secure all the data remotely on the cloud. Cloud-based inventory management also supports scalability for business growth.
7. Leverage IoT
For faultless inventory management, the Internet of Things (IoT) is the need of the hour! This network of devices, sensors, and software connected to the internet has created wonders in business inventory management. IoT enables real-time visibility, communication, itemized location monitoring, and accurate data collection without human intervention.
The IoT network collects data using sensors and software and sends out necessary information and alerts to the relevant department and people automatically. IoT-based predictive analytics help lower inventory costs by identifying potential risks, allowing the business stakeholders to take appropriate preventive measures at the right time.
Wrapping Up
As Joseph Brandt rightly said, “control the inventory – control the profits!”. Implementing inventory management effectively for your business helps save time and costs and leads to enhanced business profits in the long run.
Manual inventory management is a tedious process that consumes enormous time and resources. Investing in the right inventory management software can significantly improve inventory management for your businesses at a nominal cost.
Adopt these best inventory management practices today to accomplish flawless inventory management and take your business to new heights!
Author Bio
Lisa Brian is a Sr. Content Writer with GoodFirms. She has 5+ years of experience in content writing and marketing. Lisa loves to write about business, cutting-edge technologies, and emerging trends in the software industry.
