Why Does Inventory Management Matter?

Why Does Inventory Management Matter?

Every facet of the supply chain is important. Each piece relies on the others in order for the process to work well. But inventory management is arguably a special part of the process.

 Inventory is the first thing to consider. It is what the customer has ordered and what the entire business is built around. When you are managing inventory, you are getting an overview of how much of the product you have on hand, how many purchases you have for it, and the amount you want to sell.

Types of Inventory

caucasian male waehouse worker checking inventory BRHZ5VNThere are four major types of inventory that exist in the supply chain cycle. Each has to be accounted for separately.

1) Final Product
This is the product that the customer ordered. It has gone through every stage of development and is ready to be shipped out to the consumer.

2) Work-In-Progress
Before your product gets to its final stage, it is considered a work in progress. This covers a broad spectrum of manufacturing. Labor is being used to create the item, but it is not quite ready for delivery to the consumer.

3) Raw Materials
Here is where it all begins. You can’t begin to work on your product until you have the raw materials to make it with. These materials need to be accounted for, too. They shift to other classifications as they are used to create the product.

4) Overhaul
This is any item that is used to create the final product but is not an actual part of the final product. Perhaps there is a special tool or device needed to make the product. It also includes any supplies for the employees. This is also called maintenance, repair, and operating supplies.

How Does Inventory Management Play a Part?warehouse storage distribution goods industry stoc DNGAVQ3

Now that you understand everything that inventory encompasses, you can compute how inventory management is used.

The most obvious way is that it keeps track of what you should have. This allows you to fulfill orders better. It is also a starting point for investigating any discrepancies between what you should have and what you actually have on hand.

All of that inventory needs to go somewhere. If you have a clear idea of how much you have, you can understand your storage needs. You also keep track of where items are being stored as they move along in the production cycle.

You can use inventory management to buy the materials you will need for order fulfillment. Once you understand how many orders you have for certain items, you can have a better understanding of what materials are needed to finish the job.

Having this analysis of your inventory is vital for the future of your business. Imagine if you had no clear understanding of what you needed to make and how many orders you could fulfill immediately. You would not be able to deliver to customers as they needed, or order more than you have storage for.

This doesn’t only affect the bottom line. It affects the customer’s experience. They will feel the inefficiency the minute they place their order. If you can get a handle on this key part of your business, you get the brand loyalty to keep your business going.

American Manufacturing Solutions is a supply chain logistics company that helps to enhance your operations by developing systems along every line of the process, from the warehouse to shipment. With over 70,000 square feet of space across multiple locations, our expert logistics knowledge and fleet of vehicles are there to make your fulfillment process better. Contact us today!