Businesses are expanding daily, and business verticals are increasing exponentially. To consider that we need technological help would be an understatement as most of the businesses that are growing these days are using Technological help as a backbone for planning out work for all departments.
Some of the most commonly used technological bases are the use of Inventory Management Software. Over the years, Inventory Management systems have been developed so that most of the mechanical and production-based industries take benefit of having to follow a structured and automated process.
Let us look at some of the salient tips that we are supposed to consider while we go for Inventory Management Software for our business:
Setting correct Re-Order Levels
One of the primary uses of having a good Inventory Management software is that it allows you to plan and schedule the re-order level of the products that dip below the cut-off.
This can be calculated and fed into the system and the inventory management software gives out an indication regarding when certain products are going below the cut-off level. Setting the re-order level actually enables to streamline product procurement. Initially, the software might need slight tweaking to enable giving out the correct input. However, slowly just as the software becomes more dynamic and stable, there is no need for one person to constantly monitor the re-order level. The inventory management software automatically starts giving notification when that is done.
In a real sense, inventory management practices are the company’s backbone. When you have an efficient and clean inventory running in the backdrop, you save a lot upon unnecessary contingency planning and you can forecast the in-flow and out-flow of products. Due to this, the inventory management software has enabled many businesses to categorize their inventory and thereby help plan how costing and procurement needs to be handled.
- There are products that have high value but less demand which need more attention because of the obvious price factor and storage cost
- Items in this category need less attention because they are of low value and higher sale and they quickly leave the inventory part and the amount of loss is minimal too
- Moderate items with moderate sales are the one in-between and need slight financial planning and assessment.
Prioritizing Valuable products
It is definitely important to boost your business with an inventory management system because your software is what rings out the timely bell. Most of the effort that the software puts and gives out information depends upon knowing which the top-items are, forecasting and planning, knowing the stock and managing procurement.
Based upon the data that your inventory management software gives out in form of reports and forms, you might be able to predict the next 30% of your total sale items and then the next 10%. These percentages might vary but, in most cases, allows you to predict the kind of products that you are supposed to be looking out for. Business models have undergone variation and experimentation due to the various prioritized products that keep jumbling back and forth and making them available in the market.
First to Come, First to Go
This is also called the First In – First Out or FIFO. Essentially, the inventory management software flags up those products that have been lying since the re-order level and the ones that need to go first. The newer products should go only after the older ones leave. This conceptually comes handy when you are dealing with perishable products and that you are left back with unsold, expired items.
The same stock sitting at the back of the warehouse is most likely to get worn out. Packaging, features, price, etc. change over time and it would be pointless to sit them out. Generally, this happens with items that are lying after the re-order point. The software still shows them as part of the active stock, and they need to be taken out first before the new ones are scheduled.
Evaluating the Carrying Cost
Carrying costs are the ones associated with carrying inventories over time. For every product that is being carried, there are extra charges included like storage, insurance, extra equipment and personnel. All these are adding to the cost to the company.
The question arises as to how the software help with evaluating the carrying cost. This is mostly done with historical data. The data from the software gives us an idea regarding what the general trend had been and thereby give information on what can be the carrying cost rend.
For excess Stocking
Excess stocking is a byproduct of ineffective sales and forecasting. Business plans failing and unplanned stocking comes when you have not gone through the data right in front of your eyes. For a long time now, ever since the advent of technology, inventory management software has become the backbone of most of the stock management and planning.
Most of the companies boost their business with the inventory management software because they are able to keep a record of available stocks and thereby also calculate the total expense for the next few weeks. Inventory management software has helped in to channelize so that stocks don’t go overboard and neither do the maintenance stocks.
This is the most important part of business planning. Contingency planning can be an essential part and you can boost business with inventory management software for most of the sections where you need to keep a track of rapid changes. Your historical data helps you to predict as to why there is a sudden increase in sale or sudden drops, if there is any negative cash-flow, or if you need to go to multiple vendors because you have orders to fulfil and a smaller number of suppliers.
Inventory Management software has helped prepare for such unpredictable situations because there are a lot of factors that impact the sales and that can be even geographical, climatic or current political scenario. Demand and supply are locally coupled with other extra factors like a drop in a number of suppliers or number of buyers, logistics and warehousing, etc. Inventory management software helps you by being on stand-by.
Many businesses have benefited with the use of Inventory Management Software helping them to do a lot of cost-cutting and planning out the work in advance. Businesses have got visibility and progress can actually be counted in numbers thanks to the new technological wave.