As discussed in our previous article, inventory management or inventory control is something that should be front-of-mind for any owners in wholesale distribution business. Businesses that understand the importance stay ahead, while others do not seem to realise just how many dollars are falling through their fingers.
Can you imagine trying to run a business when you do not know how many widgets you have in your inventory? Or when you need to complete a sale, not knowing exactly where they are? It is even worse if business owners do not have enough widgets on hand to complete the sale and risk losing customers to a competitor.
The significance of proper inventory management cannot be emphasized enough. An efficient inventory system will provide visibility for all items right down to the shelf and bin in multiple locations. It prevents stockouts, allow for ample lead time to replenish stock, and give businesses an idea of the value of stock at any given time.
If businesses are serious in sustainability and generating consistent strong profits overtime, then understanding the importance of inventory management is the first step to continued growth. Have a read on our previous article on the importance of accurate inventory control:
How businesses maintain inventory?
There are numerous ways for businesses to maintain inventory. Conventionally, the basic way is to create a spreadsheet with various columns including product name, item number and quantity.
Also, businesses include columns to deduct products that are being sold and shipped. A log of returns and new incoming stock are also common columns included.
Creating a spreadsheet is of course an incredibly labour-extensive process that no growing business wants to deal with. It requires continuous manual monitoring to ensure every transaction is accounted for.
The information provided will not be easily shared and understood. At the same time, there is a huge pitfall for human error. People are prone to make mistakes, mistakes that are difficult to detect and cause inaccurate inventory numbers.
The effect of Technology
With the modern supply chain increasing the complexities of handling inventory, the significance of inventory management becomes irrefutable.
Businesses and their processes have come a long way since traditional small-and-mini shops were established. Typically, small-and-mini shops are associated with the image of old-fashioned general stores.
However, in this generation, modern small and medium sized businesses have evolved into efficient and competent counterparts to the larger Big Box retailers and chain stores through the use of technology.
As technology created interesting opportunities for small and big modern businesses, challenges have to also be faced at the same time. In Logistics Management’s Annual Warehouse and Distribution Centre Operations Survey, it is reflected that technology caused businesses to deal with:
1) Increased E-Commerce and omni-channel sales
2) Increased number of stock keeping units (SKUs)
3) Increased Inventory turns
These challenges are the result of increased E-Commerce and omni-channel involvement through technology.
How Technology helped in Inventory Management
Small and medium sized businesses now differ from those in the past. This is due to the growing constant improvement of technology, which gives businesses now an advantage to grow but at the same time challenges to face.
Pen and paper, fundamental in-and-out transaction recordings and spreadsheets worked for small and medium sized businesses in the past. However, now that additional inventory challenges include increased sales, stock keeping units and inventory turns, what works for the small and medium sized businesses today?
The answer is strangely, technology. Just as technology has caused potential challenges for businesses today, it has also provided a solution.
Certain technology exists specifically for inventory management purposes – inventory management solutions such as inventory software or inventory management system.
What is Inventory Software?
An inventory management system or inventory software oversees all of a company’s inventory and stock items. It enables businesses to track and manage every item of inventory through its entire lifespan, from a warehouse to a customer’s shopping bag.
Inventory systems are often build using a similar form of application. First, the system has a way of identifying each stock item, usually through a barcode. After each item is coded, the system needs a barcode scanner to track the items as the items come in or leave the warehouse.
A dedicated barcode scanner or even a smartphone app enables the consistent tracking of stock items. Next, the system needs an efficient software that can keep track of all the items and manage them. Simply, the software acts as a nerve centre.
At the same time, the software analyses data and generate detailed and extensive reports that keeps business owners well informed. Advanced inventory software such as Million Inventory Software can even link up with other software systems such as accounting software.
Another basic element inventory systems include is an inventory valuation method, such as First-In-First-Out (FIFO) or Just-In-Time. Finally, like all other efficient systems, well trained employees are needed to keep the system running smoothly and effectively.
Advantages of Inventory Software
An inventory management system helps keep a business more organised. With ease of tracking and management of inventory, it is easy to know what a business need, when it needs and in what quantity.
An advanced inventory software at the same time produces detailed records through reports that give business owners information of every assets in a business. Insights such as which products that are selling fast and which are selling slowly are also reflected through the reports, giving business owners an edge over competitors.
Systems can also be pre-set to reorder a certain popular inventory item so it is never out of stock and readily available for customers. Having all these information and processes in one efficient system allows businesses to make informed decisions about the needs of a business.
Tracking and Transparency
One of the big advantages of inventory software is increased tracking and transparency. With all of your assets constantly and efficiently being tracked, strengths and weaknesses of a business can clearly be determined.
Plus, knowing how much your inventory is worth can easily be calculated. As mentioned above, with barcode scanners being used to track products through their entire life cycles, businesses are able to see where items are located in real time, making it more difficult for inventory to fall through the cracks.
Through tracking, businesses can keep and maintain enough stock to prevent overflowing of inventory. This minimises the amount of unused inventory on hand, lowering business’s storage overhead.
Improved Vendor Relationships
An inventory management system can help improve a business’s relationship with vendors. With all items being tracked seamlessly, both the business and vendor are well informed and prepared of ordering needs. Certain products can be automatically reordered through the system at certain intervals based on order history.
To add on, schedule of deliveries can be made in a more systematic and organised way. This keeps relationships smooth and unconflicted, with both parties knowing exactly what is expected from one another.
The final important feature of inventory software is integration. You can set up the inventory software to integrate with numerous other software systems, such as accounting system, point-of-sale system and purchase order system.
This enables the business to comprehend the value of a product at any point in time, assisting in accounting and asset management. Linking up with other systems allows better organisation and improved streamlining of processes.
With Million Stock Control Software, many companies have benefited greatly from using a computerised system that minimises human error and automates time-consuming work. Not only is Million able to create unlimited databases, it does not have recurring fees therefore at a fixed price, you get to own the software forever!
- Landing Cost
- Bill of Material
- Serial Number
- Stock Valuation – Fixed cost/ Average Cost/ FIFO and many more!