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One of the primary operations in an e-commerce business is inventory management, where the status of products/stocks must be updated frequently to ensure a steady delivery flow. Adopting the most recent tech-enabled inventory management solutions can effectively measure inventory turnover. This performance metric evaluates the frequency of stock sold in a given period. Obviously, the balance should be maintained between available inventory and stock sold. Poor inventory turnover can lead to unsold or dead stock.
Inventory and order management is vital for an enterprise’s health. It keeps the chances of stockouts and inaccurate records under check. But like any other operation, the management of inventories is not devoid of challenges.
Managing stock flow and maintaining a clean record of movements tallied against total sales is difficult. Managers are often tasked with creating and maintaining inventory objects, such as locations, items, batches, groups, and cost items. Movement of items into stock through purchase requisitions, adjustments, and transfers are some of the other critical responsibilities. No doubt, inventory management is riddled with challenges that give birth to numerous issues in the future. And a few of them would be:
Inventory management solutions powered by innovative technology like ‘AI and Automation’ can prove beneficial, given the complexity of workflows. However, enterprises resort to various other tactics to overcome the hurdles in inventory management.
The following tactics will help you prevent ineffective inventory management, whether it’s a concern for you now or could be in the future:
Businesses may decide which goods to order, when, and how much to order with the help of inventory management software solutions. Inventory is monitored from product purchase through a sale.
Inventory management solutions ensure sufficient inventory is available to meet customer orders and provide timely warning of possible shortages. In addition, such tech-enabled platforms recognize trends and help enterprises respond effortlessly. Inventory turns into revenue after it is sold. This is because inventory ties up cash before it is traded while being recorded as an asset on the balance sheet. Hence, fewer items in stock are expensive, transcending lower cash flow.
The primary objective of enterprises is to sell items as per market demand; hence, effective inventory management should be the foremost priority. Businesses can only earn money if they have stock to sell or procure supplies in required quantities to fulfill orders.
Stock shortages, however, are only the first difficulty brought on by inefficient or non-existent inventory management. In the absence of continuous monitoring, the chances of ordering excess goods remain high. Such instances can result in shortages of cash. Further, over time, expired, out-of-date, and otherwise unsaleable stock result in bottom-line losses.
Unsold inventory on hand too late in the year results in exorbitant property and income tax payments for the business. However, such crises are best handled by imbibing intelligent inventory management strategies and tools in the existing operating action plan.
Accurate inventory management is essential to running a profitable commodities firm. Incorrect stock ordering and other problems can be avoided with regular stock tracking.
Effective inventory management solutions offer the following benefits:
Limited inventory visibility: Consider the consequences of needing help finding or recognizing stocks in your inventory. You won’t be able to transport the product on time, which could harm your company’s reputation. Your company’s bottom line will be affected by an inventory that needs to be more accurate, complete, and challenging to locate.
Poor inventory management procedures: Huge inventories should not be managed manually using paper-based processes if you want your firm to flourish. Lack of digitization and ineffective inventory management procedures only yield poor results when sales volume soars and inventory grow.
Tracking down obsolete material: Almost all businesses experience this issue frequently. Only some products or materials will be sold, and a few materials will become outmoded over time and forgotten by inventory managers. However, when a new requirement develops, most choose new materials instead of recognizing and utilizing outdated ones. As a result, costs go up, and more material is wasted.
Finding materials that were placed wrongly: A mechanism to track in-store goods and equipment is the leading cause of this problem. Most of the time, the workforce spends a significant amount of time searching through the inventory for a particular item to sell because thousands of items are stocked. Making the wrong material choice slows down sales and lowers consumer satisfaction.
Managing overstocks: Purchasing resources without selling the ones you already have will seriously reduce your company’s earnings. Poor management and stock control by managers are to blame for this problem. When done manually, a few materials won’t be considered, and purchasing the same supplies once more would reduce the earnings.
Managing inventory waste and faults: Delivering the stocks on time depends on keeping a robust inventory. Untrained operators’ non-standard processes resulted in defective inventory and waste. Inventory waste and faults have high costs and can result in dissatisfied consumers.
The lack of a centralized inventory hub: Stocktaking can be very difficult when inventories are spread across several different sites. The precise information about the stocks from several places makes it more difficult during shipments and frequently causes shipping to be delayed. One of the ongoing problems that most businesses today are dealing with is this.
Understanding inventory levels and finding the inventory location in warehouses is the aim of inventory management. Inventory management software tracks the movement of goods from the supplier through the manufacturing process to the customer. On the other hand, inventory management in the warehouse keeps track of picking, stock receiving, packaging, and shipment.
The process of inventory management:
Before creating an inventory management plan, you must thoroughly understand each step in the process. This is essential for avoiding errors and selecting your company’s best inventory management program.
Although many supply chain leaders perceive inventory management and demand planning as separate entities, they are quite linked to one another. This is because inventory management is related to the stock on hand for manufacturing the customers’ orders whereas demand planning is an estimate or projection of what should or may occur with the orders.
Hence, it is the procedure for operationalizing demand projections to meet inventory goals. In other words, planning is about putting demand prediction ideas into practice. Inventory and stock levels are only a tiny portion of what demand forecasting includes. The marketing budget, inventory levels, the number of staff required per day, and many other factors will be based on this projection. A business plan will be built around the demand projection to meet demand and increase profitability.
On the other hand, inventory planning is a lot more proactive and involves a comprehensive forecast analysis process and determining how much stock to order and when. To ensure everything goes correctly, one must consider the complete supply chain and product lifecycle when planning your inventory.
Decision-makers are aware that they require an inventory management system that is scalable. Hence, cloud-based inventory management systems such as TradeEdge are ideal for organizations of any size since they feature automatic replenishment, lot tracing, warehouse, and fulfillment management tracking across multiple locations.
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