What is Inventory Management?
Inventory management is the art of managing the inventory in an organization. And a software which is a computer-based system is used to serve this purpose.
This inventory management software helps the user in tracking inventory levels in the organization
In addition, it also helps in tracking the orders, sales and deliveries. Apart from tracking purpose, the software when used in the manufacturing industry, helps in creating many production related document like bill of materials, work order etc.
This inventory management system or software is generally used by many companies and it helps in avoiding overstock and shortage of inventories.
Features of Inventory Management:
Comprised of many components, the inventory management system makes handling the inventories an easy and simpler task.
Owing to the inventory management services, the overall efficiency and productivity of the business improves.
It is essential to use such kinds of inventory software for the business as they handle the regular tasks and time consuming chores efficiently and this in turn lets the focus be on the production part.
Following are few of the features of inventory management system.
1. Order management:
With the help of a proper and effective inventory system, an adequate amount of inventory can be maintained at all times.
The system raises an alarm in the case where the inventory drops down a specific threshold limit or exceeds over and above the prescribed limit. In both the conditions, due steps are taken and the needful is done.
2. Asset tracking:
Tracking of the asset is yet another feature of asset management.
In the case where there is a requirement of a specific product/ raw material and it is not easily traceable with the naked eye or is stored in the warehouse, then in that case measures are taken and the location of the same is identified using the software.
This easy tracking of the product helps a great deal in saving the time and energy of the person incharge of finding it and the same can be invested somewhere else and productivity can be reaped.
The identification in such a case can be made through serial number, barcode etc.
3. Service management:
In the case of companies which deal primarily into the service industry, this kind of management system helps in tracking the cost of the materials which are used for providing services and includes the cost of cleaning, supplies etc.
This in turn helps in attaching the cost to the total cost of the services.
4. Inventory optimization:
An inventory management methods helps a great deal in optimizing the inventory. It helps in deciding the reorder point for a manufacturing process, i.e., when should the fresh order for inventory be placed along with the appropriate quantity of inventory.
It also helps in managing the stock in hand as well the days for which the stock will be available in case there arises some emergency due to which the fresh order cannot be placed for new stock.
All of these features of the inventory management system make it one of the most important systems which should be integrated within any business for better productivity and more efficient results.
Objectives of Inventory Management:
An inventory management model or system serves many purposes when introduced in an organization by making the work easier and simplified.
The objective of inventory management is to or purpose behind installing an inventory management system in an organization can be summed up as under:
1. It helps in minimizing the capital investment which gets stuck up due to maintaining the excessive stocks. The actual requirement would be estimated and the stock will be maintained accordingly. Hence, there would be no excessive stocking.
2. It makes sure that there is uninterrupted production in the business by ensuring timely and enough supply of the raw materials. Through the software it is ensured that there is no under stocking so that the production procedure does not get hampered due to lack of inventory.
3. This method uses a scientific way for calculating inventory. This leads to a more accurate result and hence helps in maintaining better stocks.
4. Owing to the calculations for maintaining stocks, the fluctuations occurring in the demand of the inventory can be managed as there is maintained a safety stock all the time within the organization.
5. The inventory management system helps in evading the risk of any kind of loss which would occur due to deterioration, obsolescence, etc.
6. A proper record of all the loss or the consumption of the stock is maintained at all the times which helps in turn to replenish the stock as and when required.
7. The inventory which is transported between various locations like the warehouse and production area etc and be easily tracked with the help of this inventory tracking management system.
8. Yet another important objective of using this system is that it makes the picking, packing and shipping items quite easy from a warehouse.
9. One of the most important purposes is to keep a track on the sales of the product and the levels of inventory maintained. With this system in function, the tracking can be easily done.
The above mentioned are few best ways to explain the objectives of inventory management.
Pros or Advantages of Inventory Management Software:
The inventory management program helps the organization in many ways. It helps a lot in maintaining the inventory in adequate quantity and supplying the same at desired timings. It makes the overall functioning of the organization smoother.
There are several advantages of inventory management software in a business setting, which are listed below:
1. Cost saving:
If taken into consideration, the inventory of any organization comprises of the maximum investment along with the workforce employed.
So, there lies a need to maintain the inventory in the best possible manner. The responsible person should look in the fact that there is no unnecessary wastage of the inventory by over stocking and there is no shortage as well at the same time.
And in order to maintain the inventory in the best possible manner, organizations use inventory management software.
The use of these software help in cutting down the expenses greatly. It helps minimizing the amount of unnecessary parts and products in storage and hence maintains appropriate stock on hand to meet the demand.
2. Saves time:
Any automated system saves on to the time as compared to the manual one. Once the system gets automated then there is a great deal of time which is saved.
And the saved time can in turn be utilized for accomplishing other tasks.
3. Increased efficiency:
With the help of inventory management software, the tasks which are related to inventory gets automated.
This automation in turn helps in increasing the overall efficiency of the organization. With the help of the software, many tasks are performed automatically like collection of data, creation of records, conducting calculations etc.
4. Warehouse organization:
Optimization of resources is yet another benefit of the inventory management software. This kind of management helps the wholesalers, distributors, retailers etc in organizing their warehouses.
Proper groups can be formed of the products which are sold together or the ones for which the demand is high, they can be stored in large quantities as compared to the ones for which the demand is low.
Likewise proper arrangement can be made regarding the inventory and the warehouse can be organized in an optimum manner.
5. Updated data:
Yet another advantage of inventory management is the maintenance of updated data.
Due to the use of an inventory management system/software, an up-to-date and real-time data of the levels of inventory can be successfully maintained.
This advantage of the system further helps in making well informed decisions as the data can be easily and successfully accessed through various devices like laptops, mobiles etc.
6. Data security:
Since the user rights for this system can be restricted, the authorized person/manager can grant suitable/limited rights to the other employees or the subordinates while accessing the data.
With the grant of the partial rights, there is no fear of data leakage or the data being misplaced.
7. Insight into trends:
With the use of the management system, the user can easily get an insight of the trends currently being followed.
It can be easily tracked where products are stocked, the suppliers of the products, and the timing for which they are stored.
All this helps in analyzing such data and controlling the inventory levels which in turn leads to maximize the usage of the warehouse space.
In addition, the businesses get properly prepared for the upcoming demands in the market for the peak seasons.
This software also helps in generating various kinds of reports which can be utilized by the management in their various studies and also helps in making many kinds of decisions.
8. Uninterrupted Production:
The system makes sure that there is no interruption in the production process due to the shortage of raw materials.
Required quantities of inventories are estimated and maintained at all times within the organization. An adequate quantity of stock is maintained which leads to smooth production procedure.
9. Adequate Stocks:
The system helps in maintaining adequate stocks which in turn facilitates timely and regular supply of the inventory.
The customers can be served with adequate stocks at desired timings of the finished products.
10. Optimization of inventories:
With the use of management system for inventory, the stocks can be easily regulated and optimized.
This system helps in facilitating the business with scheduling the production; it helps in avoiding shortage of materials and also helps in keeping away the duplicate ordering.
11. Minimizes losses:
In the case of obsolescence, damage, deterioration etc., the inventory management system helps a great deal in minimizing the losses as the stock/ inventory which is maintained in the stores is according to the requirement or the trend.
When the inventory management software is used, it helps the business in saving on to the expenses which may incur due to fluctuations in the prices as it induces the business into economic lot buying and this happens generally when the prices are low.
Cons or Disadvantages of ERP Inventory Management Software:
Although the system renders end number of advantages to the business, but along with the positive points there are few negative points as well.
These disadvantages of inventory management can be listed as under:
Extremely beneficial in many aspects, this management software is available in the market at a high cost.
Although the system provides such great features and makes the entire business a lot better and efficient, but all this comes at a cost.
Big time businesses are able to cover up the cost or the one time investment in some time but in the case of small or medium-sized business, it is at times not feasible to maintain such software.
Although the use of an inventory management system makes handling the inventory quite easy but learning how to operate it is quite a task.
Special training sessions and manuals should be adhered to, in order to successfully operate the system.
Learning how to operate the system can be lengthy, cumbersome as well as complex.
But once successfully installed and training completed, it can prove to be a blessing for the business and it helps a great deal in the smooth operation.
3. Limited elimination of business risk:
Although the management system helps the business in eliminating many kinds of risk, but even after using the system, the business is open to many other risks.
The system helps in controlling many risks but the fear of facing and encountering many other is still open. Hence, with this system in use, many kinds of risks are restricted but it fails to make the entire process risk proof.
After considering the pros and cons of the inventory management system, it is always advisable to install the software in the organization as it finally leads to many benefits. Although there are few disadvantages associated with it but the benefits turn out to be more in number.