Inventory
August 16, 2023
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For any business dealing in products, whether production or just selling of finished goods, inventory is a critical asset.
It is what generates revenue for the business.
Inventory management is therefore a very important function for such businesses.
Inventory management can be defined simply as the process of ordering, stocking, using, and selling a company’s stock of goods.
While this sounds simple, it is actually not so.
It is a complex process where the inventory manager has to consider numerous factors.
What to order, how much to order, when to order, whom to buy from – these are questions that must be answered after taking multiple factors into consideration.
The business needs to have sufficient stock on hand to meet the needs of production or sale to customers; however, excessive stock can lead to high carrying costs.
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Local vendors may deliver products quickly while international vendors may be much cheaper.
Then there are seasonal variations in demand to consider as well.
Mistakes in predicting demand can cost a business revenue loss or they can end up with dead stock.
So, you can see that there’s a lot more to inventory management than meets the eye.
Business managers often combine different types of inventory management processes and come up with their own unique system that helps them to efficiently manage inventory levels, pricing, supply chain, logistics, and so on.
However, inventory management can be cumbersome and time-consuming if done manually.
An efficient ERP system like Tranquil can help you automate and streamline your inventory management, thanks to its robust inventory management module.
Inventory models refer to the different systems of inventory management that are used by businesses in an effort to efficiently maintain optimal inventory levels.
No one method can be considered perfect – each has its own pros and cons.
Here are a few different inventory models for businesses to choose from:
There are even more models out there though these are the most popular ones in use.
ALSO READ: Advantages of ABC Analysis in Inventory Management
Let’s now check out the most popular inventory management trends:
Cloud technology makes inventory management more efficient as the vendor takes care of servers and software updates, and there are fewer IT problems.
Data like purchases and inventory levels can be easily synchronized across stores, warehouses, and supply chains, irrespective of location.
With remote working becoming more common by the day, cloud computing is being increasingly adopted, and it facilitates hybrid work setups as well.
Cloud-based inventory management systems are the best.
ALSO READ: What is Hybrid ERP?
The Internet of Things integrates cloud technology throughout locations, allowing computers to communicate with one another.
It is possible to add products, equipment, scanners, loading bays, and other things to the IoT network.
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This refers to offering multiple channels to customers for purchasing goods – physical stores, social media, specific apps, online marketplaces, and company websites.
This also extends to activities like returns, after-sales service, deliveries, and more, and not just marketing goods and services to customers.
They can get access to data related to warehouses, supply chains, and distribution too.
However, omnichannel services necessitate a highly connected system.
From the vendor to the manufacturer to transporters to retailers, everyone has to be connected and communicating with one another to deliver this omnichannel experience.
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A customer must be able to look up prices online, and stocks at a store they prefer, and go to the store to verify the information.
They should be able to know the status of their orders and get information related to possible delays.
This necessitates real-time communication between different systems and updating of information as it changes.
This means that factors like demand planning, supplier management, inventory reconciliation, and tracking of distribution and logistics need to be coordinated.
Thanks to omnichannel services, customers can get the most updated information possible.
AI and ML are no longer new, but they are being increasingly used in inventory management.
As these systems continuously learn about the inventory system of a business, they help in improving it.
They are capable of integrating inventory levels and track movement across complicated networks, and help in detecting inefficiencies increase expenses.
For example, you may be able to discover that a specific type of packing leads to higher shipping rates.
With IoT integration, artificial intelligence and machine learning get more data to study and become more robust.
When a sufficiently large amount of data has been recorded and subjected to analysis, you can speed up picking time in the warehouse.
Analytics can show which products are preferred by specific customers, which items are usually bought together, and so on.
These products can be stocked close to each other in the warehouse, saving pickers time and speeding up not just the picking but delivery too.
Data analytics depends on AI, ML, and IoT.
With development happening in these three spheres, more companies will be able to adopt predictive picking.
ALSO READ: How to Avoid Understocking and Overstocking in inventory?
Warehouse automation already exists, but industry experts predict that the automation will be taken to newer levels, reducing dependence on human effort, and thereby, wages spends.
With sharp advancements in robotics, AI, and ML, the areas for automation are increasing, and with greater availability of software and hardware, costs are coming down.
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Automation means replacing human effort with machines like automated guided vehicles or AVGs, and autonomous mobile robots, or AMRs.
The former has been in use for over 5 decades, while robots of course are more recent, and hence, capable of doing a lot more.
AMRs are fuelling automation of warehouses significantly.
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Multiple locations of distribution across a specific region, nation, or even the whole world, are required for distributed inventory management.
A geographically streamlined supply chain management and quicker deliveries are made possible when you store supplies and products.
You can scale and grow easily, and handle crises more efficiently too.
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Major global e-commerce companies and online marketplace companies have been using multiple warehouses to expedite shipping and decrease transportation expenses, spurring others to follow suit.
Multi-location warehouses were especially useful during the pandemic lockdowns, and will significantly help during any emergency.
To make multi-warehousing possible, it is necessary to have cloud technology.
Cloud-based inventory management software is becoming more advanced with improved capabilities, and the cost is reducing, making it a better option by the day.
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Small and medium-sized businesses are normally not capable of funding the equipment, special software, or warehouse designs to get the most out of specific inventory management methods – so they outsource to TPLs or third-party logistics companies.
This ensures that there is no need to make heavy capital investments, as the TPLs have the requisite resources which the business can access for an affordable fee.
With data analytics and artificial intelligence offering improved insights into both sales and sourcing, businesses are better informed and able to make better decisions with regard to purchasing.
With smart inventory forecasting, companies will be able to predict how much inventory they will need with the dynamic conditions and can maintain optimal inventory levels.
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Smart inventory forecasting helps in personalizing marketing messages and product suggestions for customers, based on their past purchase history.
The expectation of future purchasing habits can also help businesses in ordering products well in advance.
Safety stock is a buffer that is maintained to protect against sudden and unexpected demand spikes, production disruptions, or delays in receiving goods that were ordered.
The safety stock helps to meet production or sales demands till new stock arrives or is manufactured.
It ensures business continuity; in the event of a disruption in the supply chain or production, or unexpected demand, the company can continue to sell.
Post the COVID-19 pandemic, the importance of safety stock has increased considerably, with more companies opting to maintain a buffer.
Businesses can achieve better communication across inventory management networks thanks to the technology advancements in IoT, artificial intelligence, and cloud capabilities.
Multi-warehousing and other decentralizing methods will decrease dependency on a specific region.
These changes will make supply chain processes more robust and sustainable not only for individual businesses but also across industries.
ALSO READ: What is Product Bundling in Inventory Management?
With the increased adoption of technology in inventory management, the way in which this function was handled has undergone a sea change.
Managers have to upskill themselves and learn new ways.
Companies are investing in training programs, courses, seminars, and certifications for their managers so that they become efficient in handling new systems.
This way, the company derives maximum benefits from their technology investments.
These inventory management trends are by no means the only ones or the final word on the subject; however, these are the most popular ones according to industry experts.
ALSO READ: What are Backorders and How to Manage or Avoid Them?
As a business, or as an inventory manager, you can simply choose to implement a robust ERP solution like Tranquil, and take the guesswork out of the equation. Our ERP solution has a feature-rich Inventory Management module that makes use of AI, makes accurate demand predictions, and helps you maintain optimal inventory levels. Schedule a demo to see how our software works; we will be happy to answer any query you may have.
