Inventory management plays a key role in the success of many businesses. Businesses with a strong inventory management strategy typically experience greater success than those with a poor or nonexistent inventory management strategy. If you’re unfamiliar with the term, though, you may struggle to implement a strong inventory management strategy. This post offers a general overview of inventory management and what it entitles.
What Is Inventory Management?
Inventory management is the process of managing and controlling the flow of goods. It takes into account the procurement, storage, tracking and fulfillment of inventory items. The goal of inventory management is to meet customer demand while simultaneously minimizing expenses and maximizing operational efficiency.
The Benefits of Inventory Management
You can expect several benefits from inventory management, one of which is higher sales revenue. There’s a correlation between sales and inventory. If you regularly keep all of your business’s products in stock, you’ll generate more sales. If some or all of your business’s products are constantly out of stock, in comparison, you’ll generate fewer sales. Inventory management will allow you to keep products in stock so that you generate more sales.
Increased customer loyalty is a benefit of inventory management. When customers are able to purchase the products for which they are searching, they will stay with your business. If they can’t purchase the products, in comparison, they may leave. Inventory management will encourage them to stay by ensuring that your business’s products are in stock and available for customers to purchase.
Cost-cutting is a benefit of inventory management. Purchasing inventory from vendors or suppliers is a cost. Storing and managing those products is also an expense. With inventory management, businesses can save money by maintaining optimal inventory levels.
Inventory Management Techniques
What are some of the different techniques available for inventory management exactly? Some businesses use the Just-in-Time (JIT) technique. The JIT technique focuses on receiving products as needed while also minimizing holding costs and eliminating waste associated. To use the JIT technique, you’ll need to coordinate your business’s operations with suppliers and vendors.
Another inventory management technique is Economic Order Quantity (EOQ). This alternative technique involves calculating the optimal order quantity that minimizes both ordering and holding costs. Many businesses prefer EOQ because it allows them to achieve a balance between inventory holding costs and the cost of placing orders with vendors or suppliers.
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