All of us have faced a situation about the time when you are planning to start a business or you are already running a business on an online basis, you will be ready in terms of bearing any uncertain circumstances. It is the rule of starting any business, that one should always consider having some kind of backup always available in the hands. Plus, when a person is running an entire business on his own, he doesn’t have enough money to stock and maintain the things in the backup area. This factor results negatively in the growth of the business.
But this problem has also been almost eliminated. Nowadays, as technology is being improved, people are looking for shortcuts and ease in everything. They are keen to try out new ideas and build exciting and efficient ways to improve their work. You may be wondering how it can be done? Simply by improving your business’s inventory work. There is no such aspect of business left now in which you could be left alone to implement automatization. All your activities can be handled with advanced technology and unique methods. But you should always start with inventory-related operations.
What is Inventory Management:
It is no secret that the most important thing that we need to take care of for incorporating a business is the inventory (products we are selling). Stocking and managing the products effectively would result in the maximization of profit for sure!
In addition to this, during owning a business, your first and foremost responsibility should be to have the correct amount of stock preserved in your business, knowledge of when and how to track the inventory ins and outs, all such factors comprise an inventory management system.
Furthermore, an important point that also should be considered in terms of inventory is that a good and expedient business would avoid the excess amount of inventory at every cost. However, he would also not prefer to risk the stock-out factor as well as to hold the inventory and just keep on paying the storage costs out of the profits.
Types of Inventory Management Systems:
There are two basic types of inventory management systems;
- Perpetual inventory management system and
- Periodic inventory management system.
Perpetual inventory system:
The perpetual inventory management system, also known as JIT (Just-in-Time) system, helps you to act at once at the right time at the right place. All of your purchases, as well as sales of the business, are recorded just when they are made. This helps you to make important decisions at the right time instead of being unaware of the conditions of the inventory till the year-end.
Periodic inventory management system:
In a periodic inventory management system, only the purchases are recorded at that time. When there are any fewer or more (fluctuations) occur in the inventory of the business, there is no action taken in between. The changes in the sales and the profitability ratios are observed at the end of the accounting year.
Benefits of Inventory Management:
- Reduction in the delay of tasks:
The main benefit of improving your inventory management system is that you are able to fulfill each and every task related to your stock on time. If you are owning a large-scale business and have a healthy reputation, then you obviously would not want to risk it.
Customers are impatient characters when it comes to the ordering and delivering processes. So to avoid any kind of delay in terms of receiving the order, tracking it, or even delivering it, you need to be fast enough, which only could be done through an effective inventory management process.
However, if your work is done on time, you could be able to split your time into much more important tasks to enhance the work of your business. Who wouldn’t want to move forward right? So it is very crucial for you if you utilize automatic software to take the charge of your inventory control system.
- Helps to manage time:
It is no secret that in order to improve your business’s revenue you have to manage your time and schedule or tasks. Plus we all have heard of the most famous quote “Time is money”. It is undoubtedly true because when you have time you can use it to spend in ways that could benefit you. Therefore, by managing your time, you could earn a lot more than you had imagined.
Similarly, in an inventory management and control system, you would be easily able to manage the operations of your business related to the inventory if you automate it.
- Storage costs are minimized:
It is no secret that if your stock is lying idle in your firm’s storage houses, you are bound to pay huge amounts of carrying cost for it, but who would want that? Therefore, in order to minimize and eliminate the holding costs on your excess items, a good inventory management system employed could help a lot. The efficient inventory management system like Inventooly can help in inventory forecasting and maintain the stock levels.
- Reduction in waste products:
As we are aware that excess inventory when lying in the warehouses of the company not only increases the holding costs but also takes a lot of space which makes it unable for entering the new products. It could be explained further with the example of the world’s largest E-commerce platform “Amazon”. It works so hard to classify your products more efficiently. You can easily identify which of your products are yielding a good amount of revenue for you and which of them are just eating the cost of your business.
Likewise, when you have the knowledge of how to manage your inventory in yielding the most profit, it could eliminate the excess inventory or waste products from your business.
- Upgrading technical management tools:
By using a modernized inventory management system, you would be able to solve all the technical issues of your business more effectively. For instance; the service department is down, or the orders are being received late, etc, such types of issues are easily managed by an effective inventory management system.
- Improved Shipping and Delivery services:
If your inventory management system is improved according to the modernized rules of the business, it guides you well in terms of services regarding how to ship and transport your products to the customers. It also acts as a trusted medium between the customer and the company. Even after delivering the product, a good inventory system awaits the response of the customers regarding their products. And if any problem occurs, their Customer help and support system is available 24/7 to guide and help you in every regard.
Problems that occur if inventory is not managed effectively:
Following are some of the unignorable problems that you would have to face in case of not managing your business’s inventory in the modern time;
- Failing to understand customer’s demands:
We have heard this a lot and it is for sure true that the customers are the basis of any business’s success. So in order to get your business and its activities on a higher level, you must satisfy all of your customers.
In addition to this, to avoid this risk you must be careful about the demands of the customers and manage your inventory accordingly. Focusing on what the customers want helps you to manufacture only what they want and eliminate the waste products of the organization.
- Unsuitable or poor inventory system:
Another main reason for failing in your business is the employment of a poor inventory management system. You need to be careful about how your business’s inventory system is running. In addition to this, the involvement of experienced employees and experts in handling your inventory will surely result in a good outcome.
Therefore, all your orders should be checked and maintained timely. Shipping services should also be managed accordingly. However, if the inventory management system is handled poorly, it will result in losing the customers, overstocking, and shutting down your business.
- Inexperienced employees:
Another main drawback of not managing your inventory effectively is the unskilled labor. If any company faces troubles or falls continuously no matter what it tries to do, there is definitely incompetent staff in your business. Don’t ever give the responsibility of your business’s main workings into the hands of unskilled people. Because by one way or another, it will result in the ending of your business’s inventory system.
- Lack of expedient observation:
When handling the inventory management system properly, you should monitor it 24/7 during the workings of the warehouses as well. A slight carelessness could result in the shutting down of your business. Moreover, when there is no proper observation of what are the demands of the customers, which stock is being ordered, and how it is being shipped, as a result, your inventory management system suffers to a great extent.
- Overstocking occurs:
Another problem that a business faces in its inventory management system if not handled carefully is Overstocking. Because when there is no proper management of tasks, the firm makes too many orders due to fear of the end of the stock in the market. However, in some situations, when a product is being sold a lot and considered to be a favorite for everyone, owners of the business fear that it might end due to excessive flow in the market.
Therefore, you need to be focused and concerned enough before ordering an excessive amount of stock and manage your inventory effectively because it will result in overstocked items at the end, which will create chaos in your business.
- Not able to attain new products:
When you are dealing with your unskilled inventory system, you have no knowledge about how to invest in the search for new products. Which in turn leads to bear great losses in your business. Therefore, if you don’t have time yourself or if you are not an expert in the inventory and stock areas of the business, you could always hire inventory management software that will help you in this regard.
This software, when hired, will help you a great deal to minimize your workload and automate your inventory-related activities. This will result in the effective and efficient management of your business activities, and overstocking will also be prevented.