Inventory Management Processes
Controlling costs and quality of goods begins with implementing a set of inventory management processes best suited to your industry type, size, and management style.
Small businesses tend to start out with simple spreadsheets, adding formulas and columns as they have more information to track. What tends to happen over time is that inventory counts differ in receiving than they do mid-way through production, and so on from one department to another. While each department’s numbers accurately reflect the inventory they’ve managed for the month, their numbers don’t match those of other departments.
Growth and success are dependent upon the systems put in place. Processing inventory when it’s received is the first step for many businesses; for others, sending materials to a third party to manufacture and then having product shipped to them for additional manufacturing processes may be essential to manage.
Either approach can be successful with the right tools to manage your inventory processes in place.
Inventory Management Processes Begin with Your Supply Chain
How far you’ll go to source your materials depends on the how long they last. If you’re manufacturing food, chemicals, or beauty products, you’ve got to plan your lead times around expiration dates.
Some things to consider in your inventory management procedures:
- Local vs. Long Distance. It’s more feasible to order microchips or electronic parts from overseas, as material quality won’t be impacted by time in transit. But managing time still matters in production planning. Ensuring you have enough product on hand to meet demand relies on how often you place purchase orders with the vendor and how long that supply lasts. Setting minimum order quantities to trigger reorder points will ensure you’re always ordering when necessary. You may need to adjust these settings for periods when demand fluctuates. If you can automate this process, you’ll save time and guarantee the task is consistently performed.
- Should you use a contract manufacturer? Whether for all or part of the manufacturing process, there are times when it’s just plain easier and cheaper to use a contract manufacturer. If part of the manufacturing involves expensive equipment or special skills, using a company that’s already properly set up to handle that is the path of least resistance. Doing it yourself could heap on additional startup costs you may not be ready to handle. And then there are times when the product is regulated and must meet certain guidelines. Handing it off might be one less headache for your business.
- Relationships. Communication is key in any business, but when dealing with other cultures, the language barrier can present a problem. You might think your supplier understood you – until something goes wrong. Perhaps equipment broke down and they don’t give you the heads up. Or maybe bad weather or political unrest threatens to hold up shipment. An open line of communication will curtail problems and you should be confident in your supplier’s willingness to communicate before you sign an agreement.
Real-Time Inventory Management
Great, your goods arrived on time! Now, how you log them into your system affects the rest of the company from here on out.
Your goal is real-time data – data that is consistent from one end of the business to the other. When you record inventory received, you want the finance department to know if the inventory count matches the purchase order.
Manual entry is subject to human error. It’s not difficult to transpose numbers or add an additional zero. Scanning barcodes is more accurate and less labor intensive. A perpetual inventory system will integrate that information across the board, so everyone has the same inventory counts in their software dashboard.
Having remote access to the inventory management solution is convenient, as the user can walk around the warehouse and scan items with a mobile device.
Q: What is the first step of inventory management?
A: If you don’t know how much inventory you have on hand, you can’t accurately do your job in any area of your business. Get started with a physical inventory count, preferably by scanning barcodes.
Q: How does inventory software help my business adapt to supply chain disruption?
A: Having a clear picture of product performance thanks to SOS’s extensive reporting capabilities will allow you to determine the price point you can afford, and how changing lead times will impact your ability to meet demand. In depth insights afford you the ability to research and negotiate with alternative vendors, if need be.
Tracking Inventory Management Processes
Once your raw materials make their way to their first workflow station, tracking inventory management processes begins. Keep it simple. If you’re a small to medium size business, you don’t need overpriced, ridiculously complicated enterprise software. You need something that’s easy to put in place and requires little tutoring for staff to be able to use it properly.
Raw materials are changed by inventory management workflow stages, incurring costs along the way as additional material are combined, manufacturing techniques applied, assets used, labor involved and possibly co-products or by-products generated along the way.
SOS Inventory was designed to handle inventory for a broad range of industries, tracking raw materials or components all through production and long after the sale is complete. Loaded with advanced functionalities, SOS can handle any manufacturing process type from process manufacturing, discrete manufacturing, made-to-order, just in time inventory and more.
When aligning all your inventory manufacturing processes for a successful business infrastructure, it’s vital to implement tools that will enhance production, streamline processes, track all types of inventory and costs, and provide intense analysis from any angle. SOS is cloud based inventory management software for small to medium businesses looking for powerful functionality at an affordable price. Align your inventory processes with your business goals and you’ll be on the path to greater profitability.