Inventory Management: Best Practices for an Efficient Manufacturing Process
Every small- to medium-sized manufacturing business understands that successful inventory management is essential.
By adopting best practices and concentrating on developing an inventory management setup that suits your business's specific needs, you'll not only have a better control on your supply chain, shipping and warehouse, but you'll also keep your consumers satisfied.
Today, we'll go through the best inventory management practices that can help you keep your warehouse operations running well, avoid wasting money, and make sure your consumers are satisfied.
Why do inventory management?
Businesses prioritize inventory management for a variety of reasons. These consist of:
- Increasing the efficiency of manufacturing lines by ensuring that procedures are not slowed down due to a lack of materials.
- Enhancing the effectiveness of order fulfillment so that firms can ship goods to channels and customers more quickly.
- Reducing expenses, such as storage costs, transportation costs and wastage.
- Enhancing the reliability and quality of operational data to help in business decisions
- Ensuring the traceability of components and raw materials in case of recalls or other problems.
Process of inventory management
Before creating an inventory management plan, you must have a thorough understanding of every step in the inventory management process.
This is essential for minimizing errors and selecting the best inventory tracking system for your business. Following is process of inventory management:
Goods are delivered to your facility: This is when subcomponents and raw materials for manufacturers or finished goods for customers first enter your warehouse.
Inspect, sort and store goods: This is when inventory is examined, sorted, and kept in their appropriate stock areas—regardless of whether you utilize dropshipping, cross-docking, or another warehouse management system.
Monitor inventory levels: This helps reduce the possibility of error through the use of cycle counts, perpetual inventory software, or physical inventory counts.
Stock orders are placed: Consumers place orders on your in-store or website.
Stock orders are approved: At this point, you either give the order to your supplier or have your POS system automatically fill it.
Take goods from stock: The required goods are found using the SKU number, selected from the stock, and shipped to the customer or manufacturer.
Update inventory levels: Implementing a perpetual inventory system, you can instantly update inventory levels and communicate them to relevant stakeholders.
Best inventory management practices
Undertake regular cycle counts
Regular cycle counts improve financial reporting, help manufacturers track inventory more accurately and efficiently, and prevent inventory-related problems before they occur.
Cycle counts, in particular, can assist make better decisions about reorder points, deliver more accurate inventory numbers, save labor costs, minimize inventory shrinkage and associated losses and lower the risk of downtime.
Strive for optimal stock levels
The ideal stock level is one that keeps enough finished goods to meet current demand and just enough raw materials to keep your production line operating at maximum capacity. By following this approach, you can minimize carry costs, free up much-needed cash flow, ensure on-time delivery of your products, and maximize sales revenue.
Manage your inventory
Your inventory level would primarily depend on the size and type of business you run. For instance, the amount of inventory held in the warehouse will be significantly different for a clothing manufacturer and a fresh food delivery business. It is generally advised to maintain low stock levels to reduce operating expenses. As a result, cash flow improves because you are not burdened by the high cost of keeping stock for a long period of time.
With the help of an inventory management system, you can determine what inventory levels would be most beneficial to the operation of your particular business. You can keep track of critical data like seasonality, sales trends, and past turnover to help you make more informed business decisions.
Embrace lean manufacturing
Lean manufacturing focuses on reducing waste. It aims to accomplish this by enabling your business to understand the minimum necessary products, staff, and other essential components you require to operate efficiently. Operating at this level will reduce waste and boost profitability. Your bottom line can be significantly improved by streamlining your operation.
Implement quality control
Any business should establish quality control as soon as possible because it is of the utmost importance. Establishing quality control processes can be as simple as creating a checklist that explains all the steps employees must take while inspecting the goods they receive. For instance, you could request staff to examine goods for the following:
- Indications of damage: tears, broken seals or leaks
- Product styles, size and color: All should match the description on the purchase order
- Prices and conditions of sale
Importance of inventory management software
- Utilizing supply chain tracking software gives you complete visibility over all of your inventory, allowing you to keep the right quantities of each item while still fulfilling orders.
- Through interfaces with important systems like accounting software and point-of-sale solutions, inventory management software automates crucial operations and lowers the possibility of human error.
- Inventory management software, helps you automate crucial activities so that you always have adequate inventory on hand to quickly fulfill orders without being overloaded with stock you can't move.
- Any business that wants to succeed must meet deadlines, and when manufacturing is impeded by a lack of necessary materials, the consequences can be catastrophic, resulting in lost clients and a damaged business reputation. Manufacturing inventory management software synchronizes any orders with your inventory to ensure that you can fulfill requests, and automated ordering can guarantee that supplies with a long lead time are always available.
The need for effective inventory management is undeniable, whether you run a small firm that still uses pen and paper inventory management techniques or a large corporation that uses advanced inventory management software to ensure you always have the product you need.