What Is Inventory Management?

Inventory management is the practice of planning the buying, storing and selling of stock—whether it’s raw materials, parts or finished goods-to ensure the right type and amount of stock is available without holding excess stock and thereby tying up cash. When done correctly, inventory management saves companies money.

What Is the Main Purpose of Inventory Management?

The primary purpose of inventory management is to ensure there is enough goods or materials to meet demand without creating overstock, or excess inventory.

What Are the Advantages of Inventory Management?

Accurate inventory management is key to running a successful product business. Tracking stock regularly can help avoid stock errors and other problems. The following are the benefits of strong inventory management:

Better Inventory Accuracy: With solid inventory management, you know what’s in stock and order only the amount of inventory you need to meet demand.

Reduced Risk of Overselling: Inventory management helps track what’s in stock and what’s on backorder, so you don’t oversell products.

Cost Savings: Stock costs money until it sells. Carrying costs include storage handling and transportation fees, insurance and employee salaries. Inventory is also at risk of theft, loss from natural disasters or obsolescence.

Avoiding Stockouts and Excess Stock: Better planning and management helps a business minimize the number of days, if any, that an item is out of stock and avoid carrying too much inventory.

Greater Insights: With inventory tracking and stock control, you can also easily spot sales trends or track recalled products or expiry dates.

Better Terms With Vendors and Suppliers: Inventory management also provides insights about which products sell and in what volume. Use that knowledge as leverage to negotiate better prices and terms with suppliers.

More Productivity: Good inventory management solutions save time that could be spent on other activities.

Increased Profits: A better understanding of both availability and demand leads to higher inventory turnover, which leads to greater profits.

A More Organized Warehouse: An efficient warehouse with items organized based on demand, which items are often sold together and other factors reduces labour costs and speeds order fulfillment.

Better Customer Experience: Customers that receive what they order on time are more loyal.

Benefits of Inventory Management Software Integrated with ERP

Inventory management practices can help you save money and keep an accurate stock count. However, you can see more benefits when you add an ERP system with inventory management capabilities. With this type of system in place, you’ll be able to:

Understand Inventory Levels Across the Business: ERP systems can provide an end-to-end view into orders through all departments, from sales to accounting to fulfillment. Centralized purchasing reduces duplication when replenishing stock, and having the ability to purchase in bulk saves money. Further benefits abound when you integrate your inventory software with accounting and back-office processes.

Automate Manual Tasks: Barcode and RFID scanning can speed stock-taking, receiving and fulfillment. Using software reduces errors from manual entries and frees staff from repetitive tasks.

Greater Visibility with Real-Time Data : The right inventory management software will give you access to real-time information on all SKUs, in all facilities. It will deliver this data to all devices, no matter where you are.

Improve Forecasting: Software that handles data collection and analytic can provide insights into trends. And when you understand trends, you can improve your stock forecasting.

Data-Driven Decision Making: Leverage the analytic capabilities of inventory management software to make data-driven stock decisions. Save money by reducing inventory and carrying costs.

Support Uninterrupted Production: By forecasting both demand and lead time, you can ensure production never experiences a shortage.

Harmonize Multiple Inventory Locations: Get an overview of stock levels in all your warehouses, distribution centers as well as retail stores and suppliers.

Optimize All Inventory: A robust inventory management software system helps maintain the right mix of stock and quantities, and at the best carrying costs. It’ll help you ensure you never have too much or too little on-hand.

Scale Inventory as Your Business Grows: You can’t accurately track 1,000 SKUs in 15 facilities manually. Inventory management software can handle that task for you.

Ensure Compliance With Local Accounting Standards: Correctly valuing stock is vital for financial transparency. Inventory management software can help with compliance with local accounting standards in your country.

Improve Product Visibility in Recalls: Digital systems allow managers to use lot or serial number records to trace products by date and location.

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