Inventory management is vital for most companies, including manufacturing and retail facilities. Maintaining the appropriate levels of inventory is important, because having excess inventory is costly. Inventory management helps in controlling and balancing both outgoing and incoming merchandise.
1. Streamlines operations
All manufacturing facilities are supposed to maintain good inventory of all the necessary supplies for producing their product. Any time one part is missing and cannot be accounted for in the inventory, it is likely the entire process of production is interrupted. As such, inventory management helps to streamline operations and boost productivity.
2. Lowers liabilities
Inventory management helps lower the loss and liabilities that are created as a result of overstock. Having an efficient inventory management plan in place will quickly notice any decline in profits. It will also assist in preventing the over ordering of certain products. A good example is when clothing stores have sales on certain kinds of cloths. These stores normally order extra stock so as to meet the consumer demands. In such cases, inventory management considers the sales before more clothes are ordered. Otherwise, the store might have to provide deeper discounts so as to eliminate excess inventory.
3. Better ordering
The other benefit of inventory management is for establishing the best time to order specific items, particularly for merchandise with unique lead times. Certain products take a longer time to arrive from their respective manufacturers than others. Hence, it is essential to have a suitable inventory management plan to account for the lead time. For example, when a shop was looking to offer great discounts on mustard, relish and hotdogs, but the condiments did not come in time. Inventory management would be used in such a case to make certain that all necessary items are in stock before the sale.
Inventory management systems allow managers to effectively allocate the resources and thus make the business more profitable.