Inventory Management
Candlefocus EditorInventory management is essential to any organization as it allows them to keep track of available stock and its movements, in addition to providing insights into future demand. It helps them plan out future inventory orders, understand buying behavior, control inventory costs, identify problems in a timely manner and improve workflow. Properly executed, inventory management also helps optimize overall customer service while avoiding unneeded costs.
In modern times, manual procedures are often replaced with specialized software systems that track and monitor inventory. These systems use various data points to identify the optimal inventory levels and give the right team members access to necessary actionable information. This enables organizations to keep precise records of the inventory, provide precise order tracking and facilitate future ordering decisions.
Four major inventory management methods are used to keep track of inventories. They are Just-in-Time management (JIT), Materials Requirement Planning (MRP), Economic Order Quantity (EOQ) and Days Sales of Inventory (DSI).
Just-in-Time management is a process through which inventory is only purchased at the point of need for maximum efficiency and minimal waste. The goal of this method is to reduce the cost of running inventory through strategic purchasing and utilization of just the right amount of resources. JIT focuses on improvement of productivity and profitability by minimizing storage costs, reducing waste and providing better control over production process.
Materials Requirement Planning (MRP) is a method that uses software to automatically calculate the levels of material needed to keep production going. This system not only looks at what is needed to create the products specified in a given period, but also looks ahead to predict future needs. It accounts for the supply, demand and lead times and generates timing and quantity orders accordingly.
Economic Order Quantity is a method used to determine the optimal ordering amounts and timing, while taking into account lead time, stocking and carrying costs. This method helps maximize profitability by avoiding over-ordering and under-ordering.
Finally, Days Sales of Inventory (DSI) is a tool used to measure the liquidity of a company and its ability to pay its debts. DSI gives insight into how well a company manages its inventories, as it compares inventory and sales data over a certain period of time.
In summary, inventory management is an essential process for managing and tracking stock movement. It helps organizations to identify optimal inventory levels and maintain an efficient workflow. Different methods such as Just-in-Time, MRP, EOQ and DSI are used for better inventory management and tailored to the organization's needs. Inventory management is critical to maximize the productivity and hold down the cost of organization.