Operations management on : Inventory management
Inventory management refers to the process which helps any organization in effective as well as efficient flow of goods with the existing inventory of the enterprise. The process of inventory management involves proper controlling of the units from one place to another as well as prevents the stock from being too high. This process also helps any enterprise to keep the levels of unit at a certain pint which would help in the operation of the same. Proper inventory management would help in order to control costs which are associated with the entire process. The inventory management will take into consideration the total value of the goods which would include tax to be generated on the cumulative value of the stock of good.
Maintaining balance between the various tasks involved within the inventory management process would help to take into consideration the three key aspects of inventory. The three aspects of inventory have been discussed in the following part of the essay. The first aspects attached with inventory management are in regards to time. This means that, proper understanding regarding the suppliers & how much time it will take to process the entire order shall be understood. Second aspect attached to inventory management relates to the transfer time of the inventory which shall be established. The two aspects mentioned above would help in knowing that, when it is possible to make the order, how many units shall be ordered in order to practice production in a smooth manner.
Importance of inventory management
As mentioned above in the essay that, inventory management has been rendered to as one of the most essential aspects for any organization in order to practice all the function smoothly. Thus, importance of the same has been highlighted in this part of the essay. It has been seen that, most of the companies use inventory management in order to practice expensive business operations. This will help them to maintain as well as keep a track record of the entire inventory which would help the enterprise to meet the needs of the customers. Many of the systems which are used within inventory management system are linked with the management information system which would help to enhance the overall efficiency of the same.
Some of the importance of inventory management has been highlighted as under. Firstly, inventory management system would help in order to help the business to accurately keep a track record of the consumer sales. With the help of the electronic inventory system, the overall sales would be ascertained. This system would also help to measure the minimum number of units which shall be kept in order to have minimum current levels of stock. Inventory management system would allow the enterprises to maintain proper levels of stock not by increasing the levels of cost but by over ordering the levels of stock. Electronic data interchange a system of inventory management would be quite helpful in order to measure the lead time in order to receive a new order. Secondly, maintenance of stock would be referred as one of the main importance of inventory management. With the help of computerized inventory system, the companies would be able to manage all the orders in a much effective as well as an efficient manner. Different styles, sizes & colors would be used in order to manage different varieties of goods available. It has been noticed that, many organizations use inventory management in order to keep fair track record of all the goods which are being sold at quite a high level & all those goods which have poor sales. Thirdly, the prices attached to the goods also play one of the most important aspects in inventory management. Use of the inventory management system will help the organizations to find what all items are priced at low rates & what all orders are booked at high prices. This system would help in order to define as well as ensure the beta deals to purchase some of the products. Buying the goods by volume would be quite helpful
Price Levels
Properly managing goods is largely based on the cost of the goods incurred by the business. Using inventory management systems will help companies find the lowest price on inventory items and ensure that the best deals are reached when purchasing these items. Purchasing goods by volume also helps companies to lower their cost on inventory, ensuring that low prices are assured to consumers. Inventory management systems track costs from purchased goods and can prepare a report indicating which vendors have the lowest cost on goods.
Count Methods
All inventories need to be counted and reconciled to the information provided by inventory management systems. Computerized systems will generate current inventory reports for management to use when conducting physical counts of on-hand inventory items. These systems will also prepare reports showing the current sales or transfers of inventory to allow management to track sold or moved goods. After conducting a physical count, inventories can be adjusted in the inventory system to ensure accurate reporting.
Trend Analysis
A great function of inventory management systems is the trending analyses that are generated for management review. These trends are used to see which months have high inventory levels or the effectiveness of inventory purchases. Trends also ensure that companies can order inventory if the inventory management system does not accurately reflect upcoming busy seasons, such as holidays or back-to-school shopping.
Techniques of inventory management
Inventory management can be one of the most expensive aspects of running a business, but with proper techniques, you can reduce the inventory burden on your bottom line. Inventory management includes all aspects of your inventory, from warehousing manufacturing materials to delivering goods to your customers.
Just in Time Delivery
Just-in-time delivery, or JIT, is an inventory system that works to reduce the amount of inventory that a company will have on hand. In JIT the company purchases inventory only a few days before it is needed for sale or manufacturing, so the inventory arrives just in time for use. By keeping inventory levels low, the company will not only save money, but will also be able to introduce new technologies and advancements to the market faster, because it doesn’t have months of inventory sitting on its shelves or waiting in the supply chain. The major drawback to JIT systems is that with items arriving a day or two before they are needed, one hiccup in the supply chain can grind production and delivery to a halt. All the partners involved in the JIT system need to be reliable and have redundant systems in place to correct problems quickly.
DropshippingDropshipping is an inventory process by which a company can sell a product to a consumer without ever having the product in inventory. The company enters an agreement with a dropshipping company, and when a product is sold, either over the phone or on the web, the dropshipping company sends the product to the consumer in return for a fee or a percentage of the sale. Dropshipping is ideal for small companies that don’t have a lot of cash available to warehouse and ship their own inventory. The downside of dropshipping is that the seller has no control over the shipping process and can’t offer different shipping times and rates, or control mistakes in the process.
Bulk Shipments
Bulk shipping is an old staple of inventory management. The idea is that it is cheaper to purchase and ship goods in bulk, so you plan to replenish your inventory less frequently than you normally would. Since you will receive less frequent shipments, you will have to lay out extra money on purchasing and warehousing the inventory, but if you’re reasonably sure you will sell the product, then bulk shipping can save a good deal of money.
Record Keeping
The basis for all inventory management is record keeping. Small companies may be best off keeping track of the inventory manually. This will reduce the cost associated with buying and maintaining a computerized inventory-control system. Larger companies should use a dedicated inventory software program that will allow them to monitor inventory levels among numerous different products and materials.
Physical Inventory
Physical inventory should be done at least once a year, and as often as once a month, depending how likely items are to be missing. Set aside a time to do the inventory when items will not be needed or moved around. If the inventory records are computerized, then enter or scan the physical inventory information and have the computer compare the records. If the inventory is managed manually, then someone will have to record the current inventory and then compare it to the record.
Cleaning Out Old Inventory
Storing inventory is not free. Inventory represents an investment in a product or material. Even if the product is relatively cheap, it costs money to house and manage the inventory. A company should always work toward selling its older inventory by running sales specials that are likely to entice buyers.
Real life examplesIn the field of technology, there are infinite numbers and types of products used, especially in telecom. Telecom inventory management is an extremely delicate and important aspect of making sure that customers receive what they need when they need it.
Because parts are so delicate and many are extremely similar, barcodes and product numbers are not only important but vital to telecom inventory management. For example, a telecom company could have two router switches that essentially perform the same function, cost the same, and have product codes that are only one or two numbers off. However, one may be for a different version of the system than the customer has, and shipping the wrong item could cause the breakdown of an entire telephone network, costing the company hundreds of thousands or even millions of dollars.
However, with careful consideration and the use of sophisticated software, telecom inventory management can be handled efficiently. Avoiding human error is the greatest necessity in proper implementation. If you enter the wrong product code or forget to add a digit to the end of a barcode, you could cause a number of errors. For this reason, most telecom inventory management systems are completely automated, using scanners and other electronic equipment to store codes and product information, including quantities and warehouse locations.
It is also important to be precise with telecom inventory management processes because the equipment generally used in the industry is worth thousands and millions of dollars, and losing or misplacing a single item is serious business.
Overall, telecom inventory management is one of the most difficult areas of inventory management in the business, not only because there are so many similar parts to keep track of but also because of the value and delicacy of each individual product. You should always maintain tight control over telecom equipment in your inventory to prevent disaster.
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