The Digital Shift: Refining What Inventory Management Is

From retailers to manufacturers, companies of all industries rely on inventory to support their operations and generate revenue. To effectively monitor their supply chains and provide for their customers, businesses must have a system in place to manage their inventory levels. So, what is inventory management and how can you properly monitor your stock?

What is Inventory Management?

Inventory management is the process of purchasing, storing, and selling a company’s items. These items can consist of raw materials and components used to build a product, finished goods that are ready to be sold to customers, and the materials used to support business operations, like tools and shipping supplies. 

There are various methods to approach inventory management, including:

• First in, first out (FIFO) method: This approach involves selling or using the oldest on-hand items first.
• Last in, first out (LIFO) method: On the contrary, this method means using or selling the most recently purchased items first.
• Just-in-time (JIT) inventory management: JIT method refers to only ordering goods or components when they’re needed. This approach relies heavily on data analysis and forecasting.
• Materials requirement planning (MRP): MRP is similar to JIT in the fact that both methods require accurate forecasting to be successful. However, MRP is more specific to the actual materials needed to create goods, and is best for manufacturers with complex processes and many parts used in production.

Common Management Techniques

Beyond using the right method to manage your inventory, there are also a few techniques that are commonly used in inventory management. 

• Barcode tracking: With barcode tracking, businesses create unique barcode labels for each good or component for seamless management. By scanning barcodes each time a component is used or a good is sold, you can keep a real-time pulse on changes in inventory levels and better understand when items need to be restocked.
• RFID tracking: Similar to barcoding, RFID tracking is another technique to accurately track stock levels. RFID, also known as radio frequency identification, also enables businesses to track the location of items, which is especially useful if you’re tracking shipments or items across multiple warehouses.
• Periodic inventory management: While barcode and RFID tracking operate in real time, periodic inventory management is another method that involves performing counts at designated intervals. This essentially works as a physical and financial audit, where a company takes stock of their inventory levels, their current valuation, and the cost of goods sold (COGS) over the specified time period (e.g., monthly or quarterly).

What Are The Consequences of Inefficient Management?

In today’s digital age, effective inventory management is crucial to keep up with faster production lines and shipping times. But, did you know that it can hurt your business when done incorrectly?

• Inaccurate forecasting: From components to finished goods, inventory moves quickly. No matter the size and breadth of your inventory, there are likely many moving parts to track and stock levels depleting at different rates. A lack of real-time inventory management makes it difficult to keep track of levels and forecast when items will need to be replenished. 
• Supply chain issues: Improper forecasting not only presents potential business disruptions but also supply chain issues. This could mean a shortage of parts inventory or finished goods, hindering your business’s ability to meet supplier or customer demand, or overstocking, which is associated with increased storage costs, spoilage, or items becoming obsolete before they can be used or sold. 
• Poor customer satisfaction and retention: When supply chain issues occur, production lines or shipments are stalled, causing backorders or complete cancellations. This can quickly lead to poor customer satisfaction and a decrease in customer retention.
• Reduced profitability: Between operational downtime, increased or unexpected costs to make up for surpluses and shortages, and sales losses, poor management can hinder profits and make it difficult for businesses to pivot.
• Loss of market share: Ongoing production issues can lead to significant customer and supplier relationship issues, hurting a company’s reputation and causing them to lose market share.

What is Inventory Management Software?

In order to avoid the risks associated with poor management (or a complete lack thereof), it’s essential to utilize inventory management software to support your operations and supply chain. Inventory management software provides full transparency into your stock so you can track materials and goods, monitor inventory levels, and streamline workflows and ordering. 

 6 Features to Look for When Selecting an Inventory Management Platform

1. Real-time Visibility: Keeping tabs on all your inventory levels is essential to maintain continuous operations. Consider a solution that provides real-time visibility into your inventory through visual dashboards so you can easily identify when items need to be restocked.
2. Barcode or RFID Tracking: Tracking your parts inventory or finished goods with barcodes or RFID tags is an easy way to send those real-time updates to your inventory management platform. Scanning these tags not only saves valuable time but also maintains accurate data by reducing manual entry.
3. Mobile App: Enable employees on the move or on the production line to easily look up records without the need for a computer. A mobile app is especially helpful with built-in barcode scanning, helping your team work quickly and eliminating the need for third-party scanners.
4. Custom Alerts: Another way to bolster transparency into your inventory is with real-time, custom alerts in your chosen platform. Set specific thresholds to alert you when stock is low so you never miss an order.
5. Robust Audit Trails: Even with up-to-date inventory data at your fingertips, it’s important to maintain robust historical records of production history, restocks, and sales. These audit trails help you maintain accountability across your team as well as accurate financial records and compliance.
6. Data Security: No matter the industry you’re in, it is paramount to secure data about your processes and transactions. Consider a solution that offers robust data security measures like SOC 2 certification and high encryption levels, along with any industry-specific certifications.

Streamline Your Inventory Management with Asset Panda

What is inventory management if not a process of streamlined effectiveness across your entire business. Beyond maintaining continuous business operations and positive customer relationships, strong inventory management is essential for organizations to remain profitable and flexible as consumer and supplier demand evolves. If you’re in search of a better solution to manage your inventory in real time, Asset Panda can help.

Asset Panda’s modern platform enables businesses across all sectors to track their inventory and streamline production and sales. Our highly customizable platform allows you to manage everything from small parts to finished goods in one centralized place for seamless transparency. Plus, our AI-powered features and mobile app with built-in barcode technology help you speed up processes and enhance productivity. 

Ready to see how Asset Panda can support your inventory management? Schedule your personalized demo with one of our experts.