Inventory management is how you organize and manage your stock through the supply chain. The cost of holding inventory is minimized when you use inventory management. It also helps you provide your customers with products as fast as possible and keep your stock level consistent. For a successful retail business, you need inventory management Shopify. With inventory management, you will know when to buy more materials to manufacture or replenish your products.
Types of inventory management
- Finished goods.
These are the number of products readily available in your stock for you to sell to your customers.
- Raw goods.
These are substances or materials used during the initial manufacturing or production of products. These materials include plastics, wood, fabrics, or metals to create finished goods. There are many producers and suppliers that you can get different products from.
- Work-in-progress.
The product is not completely made. It is partially finished. WIP refers to all the production costs which include machinery, labor, equipment, and raw materials. This cost is transferred to the finished goods account and recorded as the cost of sales.
- Maintenance, repair, and operating inventory.
These are the equipment and tools needed during production to create the final product. They include cleaning supplies, tech equipment, personal protective equipment, and office supplies.
What are the benefits of inventory management?
- It saves money.
Stock will cost you money unless you sell it at a profit. If inventory is not sold, it will cost you more in terms of insurance, storage, handling, transportation, and employee salaries. It is risky when a business overstocks. Customers will expect to find items advertised as being in stock to be available when they shop. Your company will get a bad reputation if it fails to meet the customer’s demands. You will lose customers, and your business will be unprofitable if you consistently run out of stock. Poor inventory management will hurt your business in the long run.
- It saves time.
For a more efficient inventory operation, use inventory management devices like mobile phones integrated with barcode scanners, analysis systems, and data storage. The speed of supply chain management increases when integrated inventory management is used. This tool automates workflow tasks, allowing employees to focus on other essential business roles. There is no need to check for record accuracy or recount the stock since you can track your products in real time. When you use effective inventory management, you spend the exact amount on inventory that is ideal for your business.
- Avoid dead stock.
It is the stock that you can no longer sell because it is out of style and season and hence irrelevant to your business. To avoid this mistake, ensure you have an efficient inventory management strategy.
- It improves accuracy.
Tracking your inventory in real time ensures you have optimal stock available to fulfill orders. When overstocking is eliminated due to accurate inventory tracking, the manual effort and cost required to hold stock are reduced. Methods used to improve inventory efficiency include:
- To ensure timely order fulfillment and reduce inventory holding costs, start by implementing a lean inventory strategy.
- Using modern inventory management tools helps to streamline operations by closing down warehouses, improving inventory management efficiency, and reducing the associated cost. By investing in robust inventory management software and techniques, you achieve agility and optimize costs
. - Customer satisfaction.
To stay relevant and competitive in the e-commerce space, your customers should enjoy a good shopping experience. When your customers are happy because they get the products they need, they will repeat purchases, stay loyal to your business, and drive more conversions by giving good reviews. Customer orders are fulfilled with accuracy and quickly when you implement effective inventory management.
- Business planning has improved.
Business insights required to improve business operations and grow your business are achieved with an in-house inventory management strategy. To monitor your business activities and transfer data easily, implement features like barcode scanning and use a central data warehouse. With easily accessible business insights, better outreach and marketing strategies are devised to drive business profitability and increase conversions.
Which features should you consider when selecting an inventory management system?
- Barcode scanning.
To avoid manual data errors, use barcode scanning. It helps to speed up stock replenishment and improve inventory accuracy.
- Inventory tracking.
It should be easy for your team to track the status of finished goods and raw materials within the supply chain. If the inventory management system provides real-time stock updates, the need for manual input for inventory tracking is reduced.
- Integration.
Your backend applications should be integrated with your inventory management system to optimize supply chain management and successfully implement automation. If your IMS is integrated with POS systems, logistic partners, e-commerce marketplaces, storefronts, and accounting platforms, business operations and communications across all business systems will be improved.
- System updates.
For the smooth functioning of your business, your inventory management system should be able to upgrade and add new functionalities to meet your specific business needs.
- Customer support.
It helps to resolve queries that your team has quickly, and bottlenecks in the supply chain are avoided. A support team will also provide complete training in inventory management software.
- Easy-to-use system.
Using a system to track multi-channel orders and manage warehouse operations is a difficult task to learn. If your team takes a long time to understand the system, your business processes will be complicated and, hence, incur losses in the long run. If your system is easy to use, the team will quickly understand it and get on with their tasks.
Conclusion
Inventory management is critical to increasing the profit margin and having a successful business. Finished goods, raw goods, work-in-progress, and maintenance, repair, and operating inventory are the various types of inventory management. Inventory management saves time, improves accuracy, saves money, provides customer satisfaction, helps to avoid deadstock, and improves business planning. The inventory management system you choose should have features such as barcode scanning, inventory tracking, integration, system updates, and customer support. Inventory management Shopify is a good investment for a successful business.
