Production Inventory Management

Production inventory management has become particularly difficult in the face of rising costs and delays of all kinds. Manufacturers deal with problems that distributors and wholesalers are immune to, simply because they buy finished goods that don’t require coordination of materials from multiple sources. If your materials travel long distances, they are more susceptible to delays arising from labor shortages, closures, and political challenges.

You have a better chance of maintaining control of the workflows that occur under your roof than the outcomes of goods you haven’t yet received. Rather than concern yourself with things you can’t control, you can take the reins on the things you can. That begins with implementing strategies to meet customer demand even when supply chains are unreliable.

What kinds of disruption do most manufacturers encounter?

If you were to take a look at the huge lots filled with thousands of cars and trucks awaiting computer chips, the outcome of a single part used in manufacturing becomes blatantly obvious. That is precisely what auto manufacturers across the United States are facing because they rely on a part that is almost exclusively created in China. Even if their sales team continues to close deals on new automobiles, these businesses face increasing costs of storage holding on to inventory they cannot move.

Just-in-time inventory models have become too difficult to pull off successfully. The approach relies on timely delivery of goods to complete the manufacturing process, particularly for items like cars that are customized with a variety of options and finishes.

When you add on tariffs and rising fuel costs, the further away the location of your supplies, the more costs they encumber enroute to your business. Suddenly, the benefits of paying for cheaper parts overseas are outweighed by the additional charges they bare before they arrive at your receiving doors.

When your business is prone to delays, shortages and rising costs, a plan to counteract resulting shortages is in order. If your goods are not perishable, you can keep additional inventory on hand, both as raw materials and goods manufactured at different stages. Naturally, you will need storage and may encounter additional storage costs. You will have to determine whether those costs allow you to operate profitably and if it is better to have safety stock than to run the risk of dealing with shortages.

What is production inventory?

production inventory managementProduction inventory refers to the ingredients or raw materials used to manufacture finished goods.

Depending on the production process, this inventory can include byproducts and waste that are produced along the production line when combining different materials or changing them with manufacturing processes like heat, pressure, chemicals, etc. Throughout these processes, the quantities and costs of inventory change; it’s important to keep track of work in progress inventory so your ledgers match up with actual inventory amounts and costs on hand.

What are production inventory examples?

Ingredients for cake like flour, sugar and eggs are production inventory which undergo mixing and baking processes to become finished goods.

Some industries use parts like screws and fasteners to manufacture machines, computers, appliances, etc.

Inventory and Production Management Software Features to Help You Succeed

  1. Better production and inventory control rely on making determinations based on historical sales, uncovering areas for improvement, and gaining clarity on what makes you successful. Thorough reports, like the ones offered by SOS Inventory, make it easier to delve into the nitty gritty of each area of production to uncover bottlenecks, identify best sellers, and set reorder points to meet current customer demand.
  2. Update purchase order frequency to account for longer lead times to ensure you always have enough inventory coming in to fill orders. Having a perpetual inventory system gives you real-time inventory quantities across your business so you can instantly view what you have on hand.
  3. Track and trace materials throughout their journey so you can pin them down in an instant should a problem arise. SOS Inventory’s lot tracking features make it easy.

Good communication with suppliers is always a plus. Developing a rapport will improve your chances that they give you advance notice of delays or equipment breakdowns.

SOS Inventory gives you a full suite of tools for effective production inventory management so you can trim waste, run extensive reports, track costs, inventory quantities, and stay ahead of business disruptions. Run a smoother operation with less headaches, streamlined processes and costs savings with SOS.

 

Thousands of companies use SOS Inventory to manage their businesses.    Free trial