Importance of Inventory Management Part 3

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14. Inventory Management Improves Your Cash Flow

Good inventory management allows you to plan when you spend money buying and replacing your stocks and parts. This foresight tells you when to buy parts, when to buy in bulk and when you don’t need to buy them at all. This allows you to prepare for seasonal times when your business is cash strapped. For example, suppose you run a business that has a low season during the winters. In that case, effective inventory management will notify you to buy your most expensive truck parts during the summer for storage.

On the other end, an ineffective system will have you buying your most expensive parts during the winter when your trucks start breaking down. That being the most challenging time for your business, it will eventually result in cash flow problems.

15. Enables You to Segment Your Vendors

An inefficient inventory management system treats all your vendors and suppliers the same. Often, it will randomly arrange your vendors in alphabetical orders leaving your team to choose your vendor of choice using sheer luck or preference. On the other hand, effective inventory management recognizes that all vendors are not the same. It realizes that vendors have different prices, delivery times, locations, and discounts.

Such an effective system will help you segment your vendors using metrics such as:

  • Your most reliable vendors (can deliver any time of the year)
  • Vendors with the shortest delivery time (brings supplies within the shortest possible time)
  • Your most cost-effective vendor (Has discounts, warranties and allows you to buy in bulk)
  • Local vendors (allow you to avoid importation tariffs)

Having such a system that segments your suppliers allows comes in handy in decision making. For example, if you require a spare part urgently, you’ll go to the vendor with the shortest delivery time.

16. Save on Storage Space

Real estate is expensive to buy and maintain, making storage space one of the most critical resources in a business. Outright, ineffective inventory management will waste your storage space. Storing excess, obsolete and disorganized goods will end up taking space, reducing your options for future storage. On the other hand, effective inventory management will make the most out of your storage space by reducing excess parts and obsolete goods.

Benefits of Embracing Software Integration in Your Inventory Management

Going a step further and digitizing your inventory management system comes with several benefits. Remember, you can have a manual or semi-digital inventory management system that runs just fine. However, going the extra mile and bringing software into your operation comes with a lot of advantages for your warehouse.

1. Syncing All Your Warehouses

Having multiple warehouses spread over a geographical location comes with several complexities of its own. For example, you could be buying a part in one of your warehouses that’s available in another without your knowledge. Alternatively, you could have an oversupply of employees in one of your less busy warehouses while other team members are overworked in another one.

The software allows you to sync details about your warehouses and have a single point of truth for data about your warehouse.

2. Real-Time Access Anywhere and Any Time

With a manual or semi-digital system, you may have to drive all the way to your warehouse to access key metrics about your operation. Above that, you may have to wait until the end of the day or the month for your system and employees to compile a report.

With modern software, you get data in real-time; your system compiles data as it happens, and you get to see data about your stock and parts instantaneously. That’s not all. Modern software isn’t limited by location. That means you can get updates about all your warehouses on your smartphone from anywhere.

3. Automated Purchases

Take a scenario where you always place an order on a set of spare parts monthly. With a manual system, the chances of forgetting one of these spare parts, making duplicate orders, or forgetting the order entirely are high.

One of the advantages of bringing software into your operation is that you can automate your purchases. You can also set triggers that get set off whenever a particular stock starts running low and orders to replace your emergency stock.

4. Ease of Compliance with Inventory Management

A warehouse worker using a tablet for inventory management.

The storage of parts and raw materials comes under its fair share of government regulation and scrutiny. Having a disorganized warehouse makes compliance and checking for faults a nightmare. The high margin of error may lead to costly mistakes that lead to fines.

Modern inventory management software has been created to help you with compliance. With effective inventory management, you can comply with regulations and principles such as Generally Accepted Accounting Principles (GAAP). They also have alerts and notifications that will inform you for example about vehicle inspection or when some of your stock or parts have not been inspected.

5. Reminders, Push Notifications, and Alerts

In inventory management, time is of the essence. You don’t want a situation like a stock-out that’s entirely preventable but is now too little too late. That’s why embracing software is a good idea because it comes with reminders, push notifications, and alerts. Reminders, on one hand, remind you of crucial aspects of your workflow that you’re likely to forget—for example, performing maintenance on your farm equipment.

Then you have push notifications. These put you updated about what’s going on in your warehouse. For example, a push notification will inform you that an operation has been completed successfully.

Alerts are warnings that raise flags early about issues in your operations. An alert will warn you about dwindling stock, a looming shortage, or if one of your key suppliers goes out of business.

Check Out Parts 1 and 2 to Learn More

Missed Importance of Inventory Management Part 1? You can find it here. If you missed Importance of Inventory Management Part 2, you can find that here.

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