Inventory is one the least important aspect for most of the businesses. But in general, it is one of the most important aspect for a running business if businesses want to scale their business at large scale.
For business start-ups, inventory management may not be an issue because they are starting up, they don’t know what will work for them and what is not going to be their running products. So, they don’t have particular data to calculate how much quantity to need in starting. They need to management minimum quantity of a particular product. But establish businesses have great idea and data to predict what are there running products and what are there slow-moving products.
For maintaining regular supply of products and avoid shortage of products in market, we need to look after our inventory i.e. product’s stock. Along with this factor, inventory management also useful to keep in check our working capital. Inventory doesn’t directly affect our manufacturing or purchase cost but indirectly it can create huge different in overall profit and loss of particular financial year.
What is Inventory and Importance of Inventory Management?
Inventory may mean different for different businesses. In general sense, Inventory is the goods and material a business holds for reselling purpose. In other words, inventory is also known as Stock. For pharmaceutical manufacturing business, inventory may be raw material, excipients or packaging material etc whereas for a pharmaceutical marketing company, inventory may be finished goods, and promotional/marketing material etc.
Types of Inventory:
Inventory meaning for your business depend at your business nature and requirements. There are four types of inventory commonly used are:
- Raw Materials
- Intermediaries or work in process materials
- Finished Goods
- Maintenance, Repair and Overhaul
How we can manage Inventory?
Best way of managing inventory is to prepare a stock register. A stock register could be prepared manually or electronically. You can purchase or use a software for maintaining your stock/inventory register or can handle it by making a spread sheet in excel. In either way you maintain, your primary goal is to maintain your inventory.
Inventory register should be separate for raw material, finished goods, work in process material and maintenance, repair and overhaul. An inventory register is a live document and need to maintain it at regular basis. Otherwise it will be useless for you.
Make a allowable minimum quantity and maximum quantity of a particular product based upon last few months data.
Importance of Inventory Management:
Avoid Shortage of products in market:
Shortage is one of the most common faced by businesses. It hurts revenue as well as reputation of business. By giving attention to inventory management, you are going to make sure, you need to maintain a particular stock of particular product. Once you feel, it is going at its minimum level, you will start re-purchase process to procure. You have previous data of consumption of any product. Based upon that you can prepare minimum and maximum allowable product’s quantity in stock and prevent shortage of product in market except unavoidable circumstances like suddenly increase in demand etc.
Prevents expiration of Products:
Pharmaceutical, ayurvedic, cosmetic and similar products have expiry date. In case of over stocked and less movement, these products are prone to crossed their expiry date or become short expiry which are not acceptable into market. Inventory management helps to maintain a particular stock of that product that can be consumed within specific period of time.
It also provides data of non-moving products so to take action for clearing stock by providing extra benefits or scheme to customer. By early indication of non-moving products, we can prevent expiry of these products.
Keep capital in check and Financial Control:
Stock management helps to keep high stock of fast-moving goods and less stock of slow-moving goods. It prevents un-necessary investment and control our expenditure associated for maintaining stock. This will help you to invest your finance at more accurate way.
Improve Service level:
If you have regular stock, you can provide better services to you clients. If you will have stock of products, then you can dispatch and deliver goods timely without delay or shortage. You will not have any order cancellation due to out of stock goods.
Build Customer Satisfaction and Business Reputation:
Stock management helps business to fulfil requirement of customers timely and with consistency. It helps to build customer satisfaction level. Having regular stock will create faith in customer mindset that you will provide products at regular basis and your sales persons or distributors efforts will not go into waste. It helps to build business reputation in long run.
Business Growth and Expansion:
Inventory management give us clear picture about which segment of product is doing good for our business. This helps us to expand our range in that particular section and grow our business. It also provides inputs of poor performing segment and needs to gives extra care for improvement in that segment.
Easy to handle and build SOP:
With inventory management, it becomes easy to handle stock by person assigning stock work. It also brings liablity toward person maintaining stock that he/she has to give clarification for any minor variation in stock. Inventory management build a standard operating procedure for your stock ware house that helps for persons to follow and repeat the process, and manage stock. Even new comers can also handle your stock easily.
Conclusion:
We can’t ignore Inventory management as it is as equally important as other business aspects. You need to make it prioritize to grow and make business in automatic mode.
Hope above information is helpful to you…
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