Typically, inventory is one of the largest numbers on the balance sheet. Having effective inventory management is an important aspect of achieving success for distribution and manufacturing companies. Let’s take a closer look at three ways to improve the inventory management process.
There are a variety of challenges warehouse and distribution centers face when it comes to inventory control. Utilizing an enterprise resource planning (ERP) system can lead to valuable time and cost savings. Here are some ways to improve inventory management through control, planning, and optimization.
Part 1: Physical Inventory Control
Physical inventory control is all about receiving, moving, stocking, and the physical control of inventory. This is typically an ongoing process with arrivals and departures occurring daily. Barcoding, consigning, and kit repackaging are all important parts of physical inventory control.
In addition, data entry is an important part of the physical side of inventory operations. All items must be tracked using the enterprise resource planning system to ensure accurate and timely inventory data collection that is essential for success. Cycle counting is also necessary. This is a manual intervention that serves to check and verify that computerized data records match physical stock in terms of both quantity and location.
Part 2: Inventory Planning
Unlike the control and movement emphasized by the physical process, systematic management emphasizes the planning process. Planning relies on varying rates of demand and methodologies. This involves right-sizing inventory that gets turned over reliably and is replenished frequently. This occurs by avoiding stock-outs and lost sales in addition to avoiding the trap of working capital in overages of pricey stock. Another aspect involves purchasing new inventory based on customer demand.
Data, just like the physical inventory process, should drive the stocking of inventory. Therefore, accurate data is essential and is driven by conscientious data entry using Sage 300, Sage PFW, or another ERP system. Systematic and pre-planned approaches to replenishing inventory involve using information that is relevant to sales, finance, purchasing, production, and shipping/receiving. Enterprise resource planning systems help store and use this data efficiently.
Part 3: Inventory Optimization
Even with planning and physical inventory controls, it is still possible to have too much or too little inventory. Frequent occurrences of stock-outs and stock overages indicate inventory levels that lack optimization. Thanks to technology, inventory optimization systems now help with supply chain management by calculating where and when inventory should be deployed to fulfill predetermined objectives. By better classifying stocking levels according to past demand and improving demand forecasting for future use, these systems greatly assist in optimizing inventory.
Although mismatches between stock and demand cannot be entirely eliminated, they can be significantly reduced by forecasting more accurately and quickly. This allows the predetermined objectives (such as measureable reductions in inventory investment, increased customer satisfaction, maximized output, and cost containment) to be more within reach.
These processes come together to make up the important inventory cycle. All of them are improved with technology meant to handle many important facets of inventory management and data collection. Learn more about enterprise resource planning systems: Sage 300 and Sage PFW.
Download our whitepaper “Better Inventory Management: Big Challenges, Big Data, Emerging Solutions” for further information on improving inventory management through physical inventory control, inventory planning, and inventory optimization.
Here at PositiveVision, we are a full service software consulting firm dedicated to bringing trust, commitment, and care back to business software consulting. Our mission is to simply help small to mid-sized businesses with their software to make them more profitable. Using our team to differentiate our products and services, we seek to develop the most innovative, easy-to-use, and efficient solutions.
When small and mid-sized, manufacturing and distribution companies use PositiveVision’s business software services, they save money while reducing inefficiencies and growing revenue. We seek to assist our clients in streamlining inefficient processes, grow revenue streams, and reduce costs. As a result, our clients are more productive, competitive, and profitable. Contact us to see how we can help your company do just that.