Inventory management is important to every industry, because of the underlying dependency over demand & supply variability that is quite common over each business model out there, cloud based inventory management system is the most commonly used method nowadays. Like we all know with developing businesses, we must have an efficient, effective, as well as innovative inventory optimization software system that won’t just keep proper track of the growing stock needs, but also keep the rate of the warehouses used for storing the inventories.
Understand the Demand
The first automated inventory control method is demand forecasting. Here the main key for controlling the stock levels is to know what products you need to carry to satisfy the market demand. It is very important to invest your time (money) to set up the advanced inventory forecasting systems that make the right demand forecasts. It is not sufficient to look at the last year’s sales or expect this year you will have to follow this similar pattern!
Efficient forecasting must consider:
Seasonality: You need to identify any kind of product in the portfolio, which has seasonal demand variations. It is the right practice to keep the seasonal demand factors a bit separate from the base demand calculations. It keeps your data clean & simple to use to forecast.
Trends: The product demand is generally influenced by technology, social, fashion, economic as well as legal factors. You need to look out for these trends in the historical demand data & adjust the forecasts in that way.
Qualitative factors: You can add qualitative forecasting factors in the data, like sales promotions, activity, and external market events.
Economic order quantity- The economic order quantity is one unique formula for an ideal order quantity that company wants to purchase for the inventory with the set of variables such as total costs of the demand rate, production, or various other factors. The goal of the EOQ is to minimize any related costs. The main formula is used for identifying the higher number of product units to minimize the buying. This formula takes several units of delivery as well as storing of the inventory unit costs. It helps to free up the tied cash in the inventory for many companies.
It is the quality control management method wherein users will group & monitor the set of stock that have similar traits. The method helps in tracking down the expiration of the inventory and traces the defective items to the original batch.
Set the Stock Level Policies
If you set the right stock level policies it will make sure you properly stock goods and proper quantities. Ensure you have the set of ‘rules’ on each SKU that you carry. The inventory classification, like
This can help, for example, you must consider setting various service levels, stock levels as well as reordering parameters for every category out there. Never forget to have the policy to reduce the excess stock & removing obsolete items. Whereas excess stock has got a negative impact on the stock turnover as well as eats in working capital, in case it gets obsolete it will gnaw away at the profit margins as well!
Often, the inventory management issues come when the product is not labeled rightly, and employees will be asked to go with the multiple disparate systems. So, by revising the systems as a whole, you can automate various tasks, and logging products in the system, errors because of the administrative tasks can reduce. Also, regular auditing of the inventory will be very important to maintain the right stock levels. Connecting your systems to offer an accurate level of data is important to make the KPIs & targets by an end of a year.
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