What is inventory management?
Inventory management assists organisations in deciding which commodities to order and when they should be ordered. From purchase through sale, it keeps track of the product. The practice keeps track of trends and adjusts accordingly to ensure that there is always enough stock to meet customer requests and that shortages are identified early.
When inventory is sold, it generates revenue. Despite the fact that inventory is listed as an asset on the balance sheet, it locks up cash before it sells. Having too much inventory, as a result, costs money and reduces cash flow.
One sign of effective inventory management is inventory turnover. Inventory turnover is a monetary indicator of how frequently stock is sold over time. A business does not want to stock up on merchandise that it cannot sell. Low inventory turnover can result in deadstock, or unsold goods.
Why is inventory management important?
Inventory management is important to a company’s performance since it guarantees that there are never too many or too few items on hand, decreasing the risk of stockouts and inaccurate records. For more details on inventory management, check out inventory management pos system Malaysia.
Effective inventory management allows businesses to balance the amount of items coming in and leaving. The more effectively a corporation manages its inventory, the more money it may save on operations.
When a business has too much inventory, it is said to be overstocked. Overstocked businesses have money tied up in inventory, limiting cash flow and perhaps leading to a budget deficit. Dead stock, or overstocked inventory, lies in storage, unable to be sold, decreasing a company’s profit margin.
However, if a company’s inventory is insufficient, it may have a negative influence on customer service. A shortage of inventory can cause a company’s sales to suffer. If you tell them you don’t have anything and continually backordering things, they may take their business elsewhere. Firms can utilise an inventory management system to establish a balance between being under- and overstocked for optimal efficiency and profitability.
Benefits of inventory management
Save money
Understanding stock trends helps you to know how much you have in stock and where it is located, allowing you to make better use of it. Because you can fulfil orders from anywhere, you may maintain less stock at each location (store, warehouse) – all of this cuts inventory costs and minimises the amount of things that aren’t sold before they become outdated.
Increased productivity
Inventory management software may assist companies in increasing production rates. Companies might concentrate on producing higher-quality things at a faster pace, with fewer inventory errors to cope with. In order to improve the firm and boost production efficiency, the corporation may reallocate labour hours to various responsibilities.
Improved customer experience
A well-organized and precise inventory system can help to improve the client experience. Customers are happier when firms can execute purchases quickly and accurately. This level of customer service may build the company-customer connection by developing customer trust and loyalty. As more people use your products, you’ll be able to build a more positive brand image and earn more money.