How to effectively manage your inventory

Inventory management is fundamental to the success of your manufacturing business. When your inventory is well organised, everything else will fall into place. Luckily, there are many technologies to help you take better take control of your inventory. Learn everything you need to know about inventory management and enterprise resource planning.

What is inventory management?

Inventory management is a combination of business applications that track, manage and organise your goods throughout your supply chain. It maps out your entire supply chain journey, from order placement with your vendors, to delivery at your customer locations. Inventory management can be supported by barcodes and tracking solutions help you keep a close eye on when shipments are due to arrive, when orders are fulfilled, and where raw materials are located, as well as much more.

Different methods of inventory management

The most common methods of inventory control include:

1. Just in Time, or JIT, methodology

With this inventory control technique, companies keep as much inventory as they need during production and only order more items when the old stock is close to minimum thresholds and due for replenishment. While this method saves on storage and insurance costs, it can lead to a stock out situation, causing delays.

2. Materials requirements planning, or MRP

The MRP method uses market demand and data from every business area, where inventory may exist, to forecast how much stock is required. It's only after considering the sales forecasts and projections that the manufacturer will trigger reordering.

3. Day sales inventory

Day sales inventory, also known as the average age of inventory, refers to the number of days a company takes to turn their inventory into sales. Companies use a unique formula to calculate how many days their current stock will last, allowing them to know when they should order their next stock.

Types of inventory

There is a range of inventory types across the manufacturing industry, which include:

•  Raw materials: typically any materials used to manufacture components or finished products. When the end product is completed, raw materials can be unrecognisable from their original form. For example, raw materials in the apparel industry include dyes, cotton, and threads
  
• Work in progress: as the name suggests, this is inventory that is being worked on. These items are still moving through the production chain and are not yet ready for sale
  
  
• Maintenance, repair, and operating supplies, or MRO: which are types of inventory that support the production of finished goods. MRO inventory includes cleaning supplies, industrial equipment, personal protective equipment, office supplies, and technology and hardware
  
  
• Safety levels: are the extra inventory quantities an organisation may purchase to cover or account for unexpected events

Benefits of having your inventory management built into your ERP solution

Inventory management systems give you visibility across your production process by tracking, managing, or organising your inventory throughout the supply chain. Without it, it could be a challenge to keep an accurate record of what is available for use in your manufacturing and distribution operations, leading to delays, product shortages, and wastage. To maximise the benefits of your inventory management practices one of the best decisions you can make is to integrate an end-to-end ERP software solution that encompasses every part of your business operations. Some of the advantages of integrated inventory management in your business management ERP systems include:

• Forecasting and restocking
  With ERP, your inventory management will sync with the rest of your operation, allowing you to manage your inventory better. Having access to real-time stock levels makes it easier to restock raw materials, either by automatically reordering the items for you or sending your purchasing manager a reminder
  
  
• Reduced waste
  Having a flexible integrated inventory management solution helps you to keep close to the numbers, tracking costs and avoid stock outs or risks of excess stock. ERP system alerts could be exactly what you need, to trigger notifications of when you have surplus inventory, so you can either return it or redistribute to stop it from spoiling in your warehouse over lengthy periods of time.

Failing inventory systems are a huge driver for many organisations who are making the decision to implement an all-encompassing ERP solution – for more information on how WinMan ERP can partner on your journey get in touch</a> with us today.

Unsure if you're ready, take the inventory consolidation quiz here