If your business plans to implement an effective inventory management system like Cin7, here’s a quick reference guide to inventory management. It also includes what you should know to scale your business efficiently and effectively with the best practices, trends, and methods to help you ensure that your business will run smoothly. You’ll also learn more about stock details and customer orders.
What is Inventory Management?
Inventory management is the process of constantly and carefully managing all the internal and external factors required to control the stocks of a business. In simple words, it’s the process of managing and processing orders and storing and selling goods to customers.
Inventory management software like Cin7 helps businesses identify which stocks to order, as well as when and how much. This simple yet complex system allows business owners to keep track of their inventory from purchase until the sale of the goods. This helps businesses streamline various inventory-related processes and helps prevent inventory gluts and shortages.
What are the Most Popular Inventory Management Techniques?
There are quite a few inventory management methods. These are the most commonly used by businesses all over the world.
Just-in-Time (JIT)
This inventory management technique reduces the on-hand inventory volume of businesses. Some business owners may consider it risky because you only purchase stocks just a few days before they’re required for sale or distribution. But Just-in-Time inventory management saves you money by reducing your need for inventory holding. Basically, you don’t need to deal with deadstock anymore. But your business should be highly agile and able to work with a shorter production cycle.
Materials Requirement Planning (MRP)
MRP calculates the materials needed to manufacture a product. It takes inventory of the materials, identifies which other materials or components are required, and then schedules their purchase or production. Materials Requirement Planning ensures that a business has the right inventory available when needed, improving the overall work and manufacturing processes. Ultimately, it helps business owners and manufacturers quickly address the demand for their products without any delays or stock shortages.
ABC Inventory Management
The ABC Inventory Management technique categorises products by importance: A being the most important and C the least important. This is because not all of your products are popular and fast-moving products, so more attention should be given to those that customers actually buy. This inventory management technique determines the most valuable products through annual consumption units, cost, and inventory value.
Some of the benefits of ABC inventory management include better time management, more strategic pricing, more accurate inventory, and improved resource allocation. It also supports demand forecasting by studying the popularity of a product for a period of time.
Backordering
This inventory management technique is where you receive orders and payments for your products that are currently out of stock. It’s a win for businesses, especially if the customer only requires a few pieces. But it can also be a huge logistics problem if you’re not ready for multiple or bulk orders.
Still, backordering usually means increased sales, especially for small business owners. Instead of overstocking an item or labeling it unavailable or sold out, a business owner may simply mark it as a pre-order item.
Why is Inventory Management Important?
Inventory is one of the most valuable assets of a business, but it can also be a risk as it’s prone to theft and damage. So no matter how big or small your business is, you should consider having a proper inventory management system. It will help you track stocks, manage sudden supply changes in the market, handle cash flow opportunities, and many more.
Inventory management systems play an important role in businesses that want to achieve a customer-centric organisation.
Different Types of Inventory Management
Get to know some of the most popular types of inventory management:
1. Barcode Inventory Management
The barcode system is one of the most simplified methods to manage inventory. It lets you assign a barcode or a unique series of numbers to the items. The barcode holds various information beneficial for the seller, including supplier details, product info, stock details, etc. When the product is sold, the barcode is scanned, and the system automatically updates the inventory.
2. Periodic Inventory Management
In Periodic Inventory Management, you manually update each inventory record in the system at a scheduled time, such as end-of-day or year’s end. This is one of the most time-consuming, as it also requires a lot of physical counting of the products and stocks.
3. Perpetual Inventory Management
Perpetual Inventory Management, also known as Continuous Inventory Management, allows you to update inventory records in real-time using various automated tools and sources. This inventory system usually uses RFID to identify the tagged product and track its details. It also records all changes in real-time, and details about the stocks are updated instantly.
4. WIP Inventory Management
WIP, also known as Works-in-Process Inventory Management, is used by businesses that create finished products or goods for the market. This system allows you to track details like raw materials, labour costs, packing charges, and more. If your business is involved in creating finished products, consider using this type of inventory management system.
5. Retail Inventory Management
Retail Inventory Management ensures that a business holds stock that customers want in neither too few nor too many quantities. This system helps retailers to meet customer needs and requirements without running out of stock.
A Retail Inventory Management System manages all your business’s tedious tasks like the quantity of each product, which product was sold and in what number, profit details, reorder product details, stock in hand, discontinued product details, and more.
How to Choose an Inventory Management System for Your Business
The task of choosing the right inventory management system for your business can be daunting and overwhelming. But keep these few things in mind:
- Easy to use – The inventory management system you’ll implement should be easy to use in all departments. It should also level up the technical capability of your entire staff.
- Feature-loaded: Before considering an inventory management system, you should list all its essential details. Features beneficial for the smooth running of your business and error-free stock management should also be carefully considered.
- Easy integrations – It’s essential that your new inventory management system is easily compatible with the e-commerce platform, accounting, shipping, marketplace, POS, 3PL, and third-party things you use to run your business.
Cin7: The Best Inventory Management Software Today
If you’re looking for an advanced inventory and order management system, consider Cin7, which lets you manage your inventory from the smallest to the most significant business details. It allows you to easily connect with Xero, ShopifyPlus, Amazon, Quickbooks, and other third-party systems.
With the Cin7 Inventory Management System, you can easily connect your sales channels, stock locations, product details, reports, and workflows. This cloud-based solution is designed to handle modern-day businesses and multichannel selling from a single platform.
The Benefits of Cin7 Inventory Management Software
If you want to achieve successful production in your business, the key is to implement an accurate and efficient inventory management system. This will allow you to track every stock detail accurately and help you avoid stock-related problems. Here are more benefits of inventory management.
1. Increased Sales and Information Transparency
Cin7 Inventory Management System lets you know when you need more stock and when your business is overstocked and/or understocked. In addition, you can expect a 2 to 10% increase in sales if your inventory is accurately and actively managed by something like Cin7.
2. Helps You Save on Money
Stocks cost money until they’re sold in the market. And when you have unsold stocks, you’ll need to pay for storage, handling, transportation, employee wages, and insurance, just to name a few. Besides that, unsold stocks are also at risk of loss due to theft, natural disasters, etc.
3. Organised Warehouse
With Cin7 Inventory Management System, you can easily have a well-organised warehouse. Your stocks will be arranged based on which have high demand and which are sold together. As a result, you can decrease labour costs, speed up orders, and provide better customer delivery.
4. Reduced Overselling and Better Accuracy
An effective inventory management system like Cin7 will reduce your overselling risk. By using Cin7, you can track what’s in stock and what’s on backorder. You can also readily check stock availability and what you need to order to meet the demand of your customers.
5. More Effective Inventory Turnover
You can optimise the value of goods in stock with the Cin7 inventory management system. Control stocks of slow-moving products in lesser quantities and increase products that are more profitable and in demand in the market.
Final Thoughts
With this quick guide to inventory management, you now know what you’ll need in the pre and post-implementation of an inventory management system. It’s essential to have an advanced and user-friendly inventory management system to manage your business’s critical parts effectively.
So if you’re planning to introduce a new inventory management system within your business, make it Cin7. It offers various automated processes that will help you create seamless transactions and a positive customer experience every time.
