Purchase Order: Component of Effective Inventory Management

Purchasing is considered to be the most important activity for a large number of business owners. The effective purchasing function lets you decide on the specification of your product or service to gain consistent, reliable, clear communication on your purchase. The failure on it reduces costs and raise quality. The businesses can direct definite strategies to create purchase orders, invoices or receipts. Read the article on How to Create Purchase Orders for step by step guidelines.

Also check out: Difference between Purchase Order & Invoice to get a clear picture on how one correlates another.

Next, comes Effective Inventory Management


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 a shortage of goods. The effective inventory management decisions are actively involved in industry verticals like manufacturing, sales activities, procurement activities and more.

Benefits of effective inventory management

• Ensures the optimum level of capital and resources are invested in inventory.

• Balances customer needs for order fulfillment

• Manages the carrying costs of items and keeps the stocks under control

• Easy to predict supply and demand

Take advantage of inventory management to develop an international supply chain as part of business operations.

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 a 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

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 coordinate with the sales teams and the production teams to understand the back-order requirements. They can use effective inventory management software like Invoicera to backorder 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.

Track Inventory

The inventory manager must ensure that he/she keeps a track of the stock on a daily basis. The inventory reports should be analyzed 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 optimized by careful analysis and rectification. This helps in the on-time delivery of goods to clients besides analyzing the supply time for better inventory management.

Product Sales Analysis

A part of sales analysis that helps with effective inventory management is a 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 at the beginning of every period. The average lead times and supply times must be carefully analyzed 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 a 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.

Inventory forecasting methods:

Inventory forecasting predicts the amount of inventory you’re going to keep to fulfill orders on time. This totally depends upon the adjustment for shipping times, customs clearances and extra landed costs.

The effective inventory management can tie up large working capital operations to the costs of operating your business. The basic stock control procedures assist in managing stock purchases and stock holding. It is important to reduce the levels of stock and turn into sales as soon as possible.

Check out: Supplier Management Best Practices


The businesses carry multiple people in multiple time zones and locations, the manual updating and sharing are not enough. With a cloud-based system like Invoicera, all information can be updated in real time. The online invoicing software helps in managing your inventory online. You can easily analyze your sale and check inventory status to order more.

Using this software updates inventory amounts, purchase orders that result from no inventory shortage down the line. The cloud-based solutions make your data accessible everywhere as global inventory management stays intact.

Better opt for cloud-based software to see how much better things get for you!




Veronika Tondon is a business enthusiast with extensive experience in Invoicing & Payment Process. She has 6+ years of experience in Invoicera, the leading cloud-based invoicing solution as Invoicing Consultant. Sound knowledge in business process execution, offers end to end solutions for complete automation of business processes and AR/AP processes. Contact Veronica for your invoicing requirement.

One comment

  1. Nice Post !
    I think the inventory managers play a very crucial role. Keep track of purchase orders, ongoing inventory, and future demands all need to be done by the manager.

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