The importance of Inventory Management in Your Supply Chain
Inventory in simple words can be defined as the stock that a company has under its hold to pursue business with. Inventory management is the idea of managing their registry of goods so that they can know how much stock to keep at what time. The Oracle NetSuite defines inventory management as the one that helps to keep a track of inventory beginning from the purchase to the sale of goods. It is important in any business to know the availability of the products for accounting purposes. For a business the stock becomes revenue when it is sold and when it is in the stock it is counted as an asset.
Why is Inventory Management Crucial?
For any company’s successful intervention in a market race, inventory management is crucial. It is known for keeping in check the parameters of demand and supply in the market of goods. In fact, it has been defined as the sustained key to success in the blogs by IIM Udaipur. The management of inventory is depended on the company size and measures adopted are meant to put a check in maintaining an equilibrium point for the customer’s demand according to the available array of products with them. Inventory management although a significant process is often overlooked. The management of an inventory is one of the core challenges of an aspiring supply chain manager.
Engagement in the Supply Chain
The supply chain capability is without a doubt one of the essential areas to master for maintaining an integrity in the market. The data regarding the demand and supply that is collected throughout different trends in market show the use of machine-controlled systems or AI that helps track the inventory in a smooth way. AI helps in analysing the trends regarding logistics of data and raw material management so that adjustments can be made for future requirements. According to a blog by the University of Tennessee, the initiatives such as machine-learning and AI are helping in the empowerment of inventory management systems for meeting increased demand and speed in deliverance.
Process of Inventory Management
Since it is such an important context in a supply chain, the process is quite complex. Specially for the companies larger in size, the inventory management process is multifaceted. The focus area initially for inventory management is accounting the stock of goods that are delivered in the warehouse in the form of raw materials or components which are shelved. For wholesale distributors it is the finished products that are received in the inventory. For the management of inventory of large businesses, a large data set is involved to keep a track of all the products which includes the lot and serial numbers along with prices and quantity of the product. Software systems such as Enterprise Resource Planning Systems (EPR systems) have come in work to keep a record across the several units. According to TechTarget.com, some of the large systems that are deployed were initially made to run on premises but currently are also used in cloud environments.
Inventory Management and Inventory Control
Granting that both inventory management and control are vital for functioning of a successful business organisation, there lies a minute difference that helps in understanding how both of them can be smoothly tackled. The overall strategy for ensuring sufficient inventory is known to be the work of inventory management while on the other hand, the guidance of the processes and tools that are deemed to be used for tracking the present stock is known as inventory control. Although an inventory control system can prove to be sufficient in some cases, a company will benefit from using both the system simultaneously.
The major aim of a supply chain management is to retain the flow of inventory to be steady. Certain techniques such as integration of demand and supply, forecasting of demand and keeping a safety stock comes in great use while trying to fulfil that aim. Thus, For proper functioning of the inventory management system, it is important to choose a system with satisfying features for specific needs.