The world of business can get complicated and cut-throat competitive. Having an edge over your competition requires you to be ahead of your game in every aspect, and managers need to learn the requirement of balanced inventory management. If you’re in the business of moving any kind of product, there are several processes like sourcing raw materials, manufacturing products, and storing them before they are sold. If your business is bigger in size and has multiple locations, you also have to think about the movement of products to different warehouses and different retailers.
All of this movement requires a lot of forecasting in terms of stocking certain items. Sometimes you overstock inventory and it just sits in the warehouse collecting dust. Other times you tend to be over-cautious and make just enough product to sell, and it backfires because of more demand. Either scenario is likely to end up in loss. The larger your business is, the more you need to practice balanced inventory management. Depending on the industry you’re in and the channels you sell through, your strategy will vary.
The channels of communication also make a lot of difference. Sometimes sales reps don’t get communicated of stock that has run out, and they keep receiving orders. By the time the issue is inspected, the orders have already been received and the warehouse can’t fulfill the order. This leads to miscommunication and eventually loss of customers. Customer loyalty is already very hard to score and maintain these days, and mishaps like this make it even more difficult for you to retain customers.
Inventory management is a technique that allows you to have better transparency in the supply chain to make processes easier and provide you with better decision-making opportunities. It is the system of tracking products throughout their life-cycle, from the stage of raw materials to manufacturing, stocking, and eventually sales. A good system will provide you with tons of data that you can interpret and realize the actual demand, projected demand, and exactly how much inventory you should have.
Inventory management is also very beneficial when it comes to streamlining your warehouse processes. With a good system in place, you can easily monitor what goes wrong if something does go wrong. This mode of analysis really helps you with resolving problems quickly. Minimizing these errors is what will lead to long-term customer satisfaction and retention.
According to a balanced inventory management system, you should have the right products at the right time and the right phase of the product cycle. It can also help you decrease product costs and focus more on developing new products and expand your market reach. Accurate historical data helps you with the recognition of big-ticket items and also seasonal items, which you can boost the inventory of when the time is right.
Now the question is how to obtain a balanced inventory system. This entirely depends on the kind of products your company deals with. For example, the same processes can’t be followed by companies in the apparel business and food industry. One can sell their stock seasonally, have a little stock overhead, and wait for the next season to sell it again. The other has to sell the items immediately before the shelf life runs out. So the first step is to analyze your needs and come up with a plan that works for you.
Some tips that work globally are as follows: