Why Warehouse Management/Inventory Management Is Important In Supply Chain
Inventory management, as part of a warehouse management system (WMS), plays a crucial role in the overall efficiency and success of a supply chain. The logistics behind it involve the careful planning, control and monitoring of inventory levels to ensure optimal stock availability while minimising costs.
Principal Logistics Technologies offers advanced and user-friendly solutions for supply chain management. Our solutions not only meet customer expectations but also go above and beyond them.
Our cutting-edge Warehouse Management Software (WMS) and Enterprise Resource Planning (ERP) solution is designed to cater to various industries, including 3PL, Distribution, Manufacturing, Wholesale and Retail.
Since 1991, we have been dedicated to enhancing the operational processes of warehouse and supply chain operators.
Through our efforts, we have successfully introduced valuable services and reduced operational expenses. As a result, our clients have experienced improved return on investment and increased revenue.
Give us a call on +44 (0) 161 888 2580 (UK) or +353 (0)1 683 3333 (Ireland) to discuss your requirements. You can also email us at info@principalsystems.com.
What is inventory management?
Inventory management is the strategic planning and execution of systematic accounting, monitoring, balancing, optimising quantities and availability, and tracking of all inventory and stock quantities. It’s vital throughout the process from procurement, and processing to warehousing, sales and successful delivery to the customer.
What is inventory management in supply chain operations?
Inventory management is a crucial component of the success of a warehouse management system and the company’s efficiency and profitability.
It is a planning, monitoring, tracking, auditing and control function of the business. A good management system follows the quantity, scale, storage and movement of inventory throughout the supply chain. This includes from procurement of raw goods to receipt, manufacturing or processing, warehousing, storage, ordering, picking, dispatch, and successful delivery.
Inventory management needs to balance seasonal and regular demand and supply, lag and lead times, availability at the right time and place, cost variations, profitability, cost of holding, stock losses, shipping and movement, and competitiveness in the market.
Without effective inventory management, the entire system would be inefficient and there would be no checks and balances to keep everyone accountable and the wheels of business in motion and the business could collapse or land in serious difficulty.
What is inventory management software?
ProWMS is at the top end of warehouse and inventory management. Via a web front-end it provides business intelligence (BI), inventory management, load bay management, integrated document imaging and scanning, wireless image capture and more.
It is a very fast and configurable modular system integrating RF-based, Directed Voice functionality and RFID functionality, developed to meet the exact needs of any enterprise-level business, as well as small and medium enterprises.
What is inventory accounting as part of inventory management?
It is the accounting method used to value assets and keeps financial track of changes in assets or stock levels.
You need to choose the best inventory accounting method to successfully run your business. It may be necessary to combine more than one accounting method in an integrated system to secure a healthier bottom line.
Typically, inventory accounting is divided into three stages: raw materials, in-progress goods, and finished goods ready for sale.
What are the four most common inventory accounting methods?
ProWMS warehouse management software from Principal Logistics Technologies seamlessly integrates with existing and planned Enterprise Resource Management (ERP) systems.
Specific item identification
This is the most accurate accounting method since it tracks the actual cost of each item that is sold.
It is the best accounting method for high-priced, luxury or unique items. Without automated systems and the latest software, it would be difficult to track the huge amount of information required.
First in, first out
Traditionally, warehouses have used this accounting method, based on the theory that the inventory you purchased will be sold first. It also assumes stock items were purchased at lower prices, but sold at current market prices. It also assumes that older stock should not be accumulated and become obsolete before it is sold.
This method is usually best for perishable items.
Last in, first out
This method is not popular, as leftover stock could be old or obsolete. However, it may have certain tax benefits in particular circumstances.
Weighted average
This method sits halfway between LIFO and FIFO. It averages the cost of older and newer stock and readjusts the price accordingly.
This may be a viable option if most of the products sold fall in the same price category, but will not be effective if product prices and descriptions vary greatly.
How Does Inventory Management Work?
The six most important stages of inventory management are:
Physical and digital safety of all your products throughout the process
Measures have to be implemented to eliminate stock losses, theft, or damage.
Easy access to stock items is required.
Procurement and purchasing
For manufacturers, fabricators, and processors, this will entail sourcing and buying raw materials and tooling for production.
Distribution centres, e-commerce & e-fulfilment, wholesalers, or large retailers will either:
– acquire components in bulk and assemble specific bundles, or
– purchase ready-to-be-sold items in bulk.
Inventories have to be created and maintained.
Production, processing, or assembly
This may involve a variety of phases, most typically managing raw materials, in-production items, and completed goods.
If you are a wholesaler or e-commerce business, you might be able to skip this step.
Storage
As for production, this may also involve different stages, each with its own inventory management system.
Safe and secure storage in the correct locations, inventory groups and batches. Integrated surveillance and security systems are an integral part of this stage.
Optimised storage of raw materials and completed goods, in exactly the right quantities, ready to be sold or shipped.
It is essential to manage inventory to eliminate or limit excess stock, yet have sufficient stock to be able to supply in the demand.
Tracking movement
Reliable tracking of each item of inventory through purchase, storage, requisitions, adjustments, sales, and transfers.
Selling
Ordering, picking, packaging, shipping, and delivery.
Stock adjustments.
Invoicing, payment.
Balancing your cash flow.
Reporting and accounting
Keeping track of production, transactional phases, delivery schedules, and reconciling inventory balances.
Comparing projected and actual business levels, forecasting demands, even in worst-case and unforeseen circumstances, such as delays or disruptions in the supply chain.
After-sales service and customer relations.
Reordering to balance supply and demand, keeping in mind the forecasting of seasonal demands.
Detailed analysis of and reporting on productivity, efficiency, financial success and profitability.
Methodical re-evaluation of product relevance, market changes and expectations.
Regular re-evaluation of supply chain partners.
Planning for growth and expansion.
What Does Effective Inventory Management Look Like?
Prioritising inventory items
Gather and understand all the essential information regarding the frequency, rate and quantities of stock items to be ordered.
Set criteria for stock segments in your inventory, for instance:
High demand, with quick turnover.
Unique or scarce items setting the business apart from others.
High ticket items that will remain on shelves for a long period.
Seasonal or cyclical items.
Tracking and monitoring all product information
Keep detailed records of all stock items using:
Barcode data
SKUs
Suppliers
Lot numbers
Origin of goods
Regular inventory audits
Regular and routine audits will lessen stock loss, prevent excess orders, ensure stock does not become redundant, keep stock quantities at optimal levels, keep track of inventory valuation, and ensure you can meet orders.
Optimise holding costs and turnover
Proper planning, organisation and control of inventory facilitate optimal stock levels and profitability.
It is important to factor in lead and lag times, anticipating demand fluctuations, price forecasting, ordering costs, bulk discounts, holding costs, stock movement, deterioration of stock, and future availability of stock.
Analyse and optimise supply chain partner performance
Reliable suppliers directly affect your ability to meet customer expectations in terms of timing, quality of goods, correct quantities, and correct items and it is important to manage their performance and service agreements.
Dependable logistics companies empower you to provide outstanding customer service and it is necessary to partner with the best companies.
A cohesive supply chain team avoids under- or overstocking and enhances your profitability, cash flow, and reputation.
It is essential to coordinate the duties and responsibilities of all your supply chain partners, employees and customers to synchronise expectations and service delivery throughout the supply chain.
Streamline your distribution and optimise transportation and logistics processes with any vendors or buyers you work with.
With ProWMS, orders are automatically recorded into a system, alerting other facilities that more resources are needed to complete the request. This ensures that the entire procedure runs smoothly and flawlessly.
Maximise your operational efficiency and improve competitiveness
Integrated WMS, ERP, and inventory management software such as ProWMS and ProERP, with automated procedures, is a game-changer in any company. The warehouse and inventory management systems will streamline operations, reduce errors, eliminate wasted labour and materials, optimise storage, and minimise stock losses.
The controls and benefits of integrated software systems
Maximise your inventory turnover ratio
Too low inventory turnover ratio (low cost and high inventory) leads to stock deterioration and devaluation, while too high inventory turnover ratio (high price and low inventory) can lead to an inability to meet market demands, particularly if consumer demand changes.
Scalability of inventory and enhancing forecasting accuracy
Various factors influence the size of inventory, including business growth, seasonal demand, promotions, and selling across multiple platforms.
It has become near-impossible to predict changes and manually keep track of and adjust scalable inventories.
The correct software tools will allow you to leverage data analytics and predictive models to forecast market demand and keep exactly the right amount of inventory.
Build solid customer relations for return business
Customer satisfaction leads to return business, the surest way to improve turnover and profitability.
Customers want good value for money, rather than just low prices with poor service and poor quality. Efficient service and good communication go a very long way towards building trust and loyalty among customers.
In today’s competitive market, customers expect good quality, effective communication, swift and correct delivery, and after-sales follow-up. All this requires efficient inventory and warehousing management, backed by the best software and automated processes.
Eradicate errors
In the past, inventory control in many instances entailed using spreadsheets and manual audits, which were prone to human error.
However, in the competitive markets of the 21st century, these methods will leave your businesses exposed to accounting errors that can put you in financial and legal jeopardy and it has become essential to automate and implement fully integrated inventory solutions that record financial data, including sales information and client histories.
Safe and secure data storage
It is becoming increasingly important to protect huge amounts of data and to safeguard your business and customer data.
Cloud storage provides the best possible security and virtually limitless capacity that can be extended as you require it. Various levels of the highest security measures are kept up to date to meet the challenges of incredibly fast technology advances.
Forecast market trends and open up new growth opportunities
In modern business, there are many interrelated yet separate variables, market fluctuations, and procedures that work together for business success.
Effective inventory control throughout the supply chain is a vital part of this process to ensure there are no delays, errors, wastage, or returns.
Book an Initial Discussion
We’d be happy to discuss how our solutions can help optimise your warehouse operations, reduce OPEX and support its revenue goals. You can contact us online or call US on +44 (0) 161 888 2580 (UK) or +353 (0)1 683 3333 (Ireland) to discuss your requirements.
