Inventory really is the lifeblood of sales and production processes within manufacturing and distribution companies. Therefore, it is important to have a sufficient stock to avoid lost sales and keep customers satisfied. At the same time, only carrying the necessary quantities of inventory avoids the need to pay extra carrying costs like taxes, insurance, security, and storage. To learn more about this balance and three complications to inventory control, visit here. In order to improve inventory control and management, it is important to understand the process and the three key facets of the process. These facets are distinct from one another and yet interconnected so understanding them all will lead to bettering the entire inventory management process using enterprise software to help get you to where you need to be as a business.
The Three-Part Inventory Process
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 enterprise software 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 is the emphasis of 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 by avoiding stock-outs and lost sales in addition to avoiding trapping 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 ERP, Sage ERP X3, or another enterprise software system. Systematic and preplanned approaches to replenishing inventory involve using information that is relevant to sales, finance, purchasing, production, and shipping/receiving. Enterprise software helps 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 out IWI Consulting’s ERP system offerings: Sage X3 here and Sage 300cloud (formerly known as Sage 300) here.
Download our whitepaper “Better Inventory Management: Big Challenges, Big Data, Emerging Solutions” for further information on the key processes involved in inventory management. Physical inventory control, inventory planning, and optimization of processes can enhance your company’s success.
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With the unique combination of industry knowledge and diverse technology expertise, IWI provides cost-effective solutions to help clients gain a competitive edge. As a Sage business partner, servicing the Greater Toronto Area, we support evaluation and implementation of operations and finance systems to optimize technology, ensuring high return on investment with a quick and painless transition to new software.