In an increasingly globalized world characterized by intense competition, inventory management is one of the biggest challenges facing companies today. It's crucial for companies, as poor management can jeopardize the organization's survival.
Even for a small business, maintaining rigorous inventory control and movement is essential—and this becomes even more evident as the company grows and diversifies its stored products and materials. To achieve adequate efficiency, it's also important to learn how to perform this process correctly.
Follow this article and learn more about inventory management: what it is and how you can implement it in your company.
Essentially, it's a set of techniques and practices used to manage the resources entering and leaving your company's inventory. This includes both materials used daily and products. Its main objective is to clarify what should be supplied, when, and in what quantity, minimizing waste of materials and resources.
For businesses that regularly move large quantities of merchandise, the rigor must be even greater. See below why it's important to invest in this sector and learn how to best manage inventory.
Cash flow is the path a company's money takes from the moment payment is received to when it's used to cover an expense. And, as you might imagine, the movement of goods in your inventory directly affects cash flow.
Maintaining proper control of your inventory also involves tracking your cash flow, the number of sales, and their respective values.
Company inventory is a necessary part of your business, but it can also generate significant costs, especially if you have perishable products that require special storage. It's important to consider how these costs affect your budget at all times.
Through proper management, you can also optimize these costs and minimize expensesThis helps eliminate waste and facilitate the movement of goods.
The amount of material required for your company's daily operations varies depending on several factors, such as fluctuations in customer demand, the addition of new products, and material updates. Therefore, your inventory also needs to be regularly adjusted.
The main objective of inventory management It's about ensuring your organization has the necessary materials and goods at all times. This way, you don't have to turn down orders from your audience or miss out on sales opportunities.
THE process Managing a large-scale inventory is quite complex. Therefore, there are several possible methodologies, each offering different advantages. See the main ones here.
This method seeks to classify products within inventory according to their priority and importance. To achieve this, all items are divided into categories A, B, or C, as follows:
This way, you determine which items should be stocked more frequently, for example. The ABC curve is based on the Pareto Principle, which states that 80% of your revenue is the result of 20% of your efforts. The idea here is to identify which products are responsible for these 80% and prioritize them in your management.
If your goal is to assess the total value of your inventory, one of the first methods to use is Average Cost. This method recalculates the average inventory cost whenever a new product is purchased. This number is used as a basis for determining the sales value of certain goods, for example.
Alternatively, you can establish a fixed average inventory value, which will serve as your benchmark for all future purchases and sales. This way, whenever a product passes through it, its value is calculated based on the current inventory.
On the other hand, if your company deals with products that have a predetermined market value, you can calculate inventory value based on the Price or Specific Cost of each item. When you can assign this value individually, simply add up the total.
In retail, this method is not used as much, as it involves establishing the value of each item individually — something that is much more difficult in an environment where there is constant and rapid movement of goods.
In this methodology, instead of considering product purchase costs to determine inventory value, the actual sales are taken into account. This automatically monitors product movement and pricing.
The tendency of this management is that, when inventory exceeds demand, the average price of each product falls. As a result, the selling price also tends to be lower. Therefore, this is an ideal methodology for facilitating scheduling. product replacement.
Other techniques involve how merchandise is organized and distributed. One of the most common examples is the FIFO, or "First In, First Out," inventory management system.
As the name suggests, in this method, the products that arrived first are the first to be removed when there is demand. This is ideal for businesses that handle perishable goods, as they can be disposed of before their expiration date.
Whatever methodology is used to manage your inventory, it's important to keep some good practices in mind and make them part of your routine. Check out the most important ones.
The most essential purpose of the numerous types of inventory management is to control available goods and materials. To achieve this, there must be a clear record of everything entering and leaving the company, as well as their respective values, dates, and expiration dates.
You should be able to clearly understand the current status of your inventory based solely on records, without having to search the site yourself. This saves time and prevents you from losing track of the flow of available goods.
Speaking of control, another reason to maintain strict inventory management is to ensure it's as close to the ideal level as possible at all times. When there's more product than needed to meet demand, storage costs continue, but there's no direct return on your purchase.
Similarly, missing products indicate that your company missed a sales opportunity or that work had to be interrupted. The cause may be a late supplier, but more commonly, it's a manufacturing error. planning.
To create a consistent record, it's necessary to register each product in a database. However, this list won't be useful if the method used to identify products isn't also unified and clarified.
Use a registration format that includes key information about the item, as well as a unit number and location. Additionally, whenever a product is moved, there should be a log showing its entire trajectory, from acquisition to departure.
As you can imagine, it would be impossible to manually track all of your company's products, especially if you move goods and materials on a large scale every day. That's why it's essential use technology to your advantage and automate some of this work.
Using a centralized database for inventory control is mandatory, so any changes can be easily viewed. The same goes for scheduling deliveries and recording departures. The more complex your logistics, more automation should be used.
Even with strict control, it's quite likely that the numbers in your records and the actual quantity of products in your inventory will be misaligned. This is the natural result of the large number of transactions and the accumulation of small errors.
Therefore, you should also schedule regular inventory checks. This way, these errors can be corrected before they accumulate and hamper your decision-making.
With these guidelines, you'll already have a good head start on improving your inventory management tools. Maintaining strict control and tracking every product movement is essential to avoid losses and maintain a proper flow.
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