Every manufacturer must ensure proper management of inventory, to ensure availability of goods whenever there is demand. This ensures that the business never loses out sales because of shortage of goods. Inventory management is also important for ensuring that only the necessary optimum level of capital and resources are invested in inventory.
There are various techniques that every business can deploy for efficient management and utilization of inventory.
Distributors and Dealers Demand Analysis
Every manufacturing business has dealers and distributors. The inventory data of these associates can be accessed to analyze their future requirements. Purchase orders can then be raised in advance, for requirement of goods in the coming quarter. This helps in effective management of inventory at the dealer’s as well as the manufacturer’s end.
Inventory managers can be hired and trained to manage the appropriate levels of inventory at all times. They can be trained to understand the peak and slack seasons for the product and other such details. These people can co-ordinate with the sales teams and the production teams to understand the back-order requirements. They can use an appropriate inventory management software like Invoicera to back-order inventory, on time. The staff needs to be trained to understand and manage inventory lead time. This is the time required for refilling of goods in the warehouse, from the time of back-order. Orders must be placed in advanced with a thorough understanding of the lead time.
The inventory manager must ensure that he/she keeps a track of the stock on a daily basis. inventory reports should be analysed on a weekly and monthly basis. This helps in ensuring that the right amount of money is invested in keeping inventory. Delivery times should also be optimised by careful analysis and rectification. This helps in on-time delivery of goods to clients besides analysing the supply time for better inventory management.
Product Sales Analysis
A part of sales analysis that helps with inventory management is product-wise analysis of sales. Products that sell faster require fast refilling and those that are slower go slow on the inventory front as well. Different products should be back-ordered separately for appropriate management of inventory for each product. The inventory should be back-ordered in such a manner, so as to optimize the transportation and other ordering costs as well.
Process Set-Up and Analysis
The inventory manager must consult the top management while deciding on the appropriate level of inventory in each period. There should be a minimum and a maximum level to be decided along with an average level. A re-ordering inventory level must also be decided upon in the beginning of every period. The average lead times and supply times must be carefully analysed for deciding the appropriate inventory levels for back-ordering. A danger level of stock must also be decided upon. This is a situation when the stock levels are too low to meet the current demand. A situation like this may arise in case of a demand spurt or a shortage or raw material or goods. This situation is avoided at best or should be rectified with the best possible efforts.