Inventory Management in 2021: Benefits, Techniques, and Software

Start growing your business by automating your inventory management.  Here is an easy guide.

What is Inventory Management?

The success of a business, big or small, largely depends on how well it can ace its inventory management game. Efficient inventory management  essentially means optimizing the inventory handling and movement  throughout the supply chain. For a manufacturing businesses the inventory value chain entails right from the procurement of raw material to the dispatch of the transformed finished goods to various retailers and distributors.

Similarly for retail and e-commerce businesses, the inventory cycle originates from the sourcing of goods from suppliers and manufacturers and distributing it to the final consumer.

Importance of Inventory Management

Inventory ownership can be both asset and liability for a business depending on how efficiently its managed. Efficient Planning and rapid inventory turnover can lead to revenue growth while, keeping  it too long in the storage can end up slowing down operations, and hinder cash flow.

Inventory management includes overseeing and controlling purchases, storing stock efficiently, checking for expired or damaged products, maintaining accurate stock counts, and more. Hence, efficient inventory management is vital for businesses as it helps in identifying trends to keep up with customer demands and prepare for a shortage in stocks. 

Common Inventory Management Challenges

Inaccurate Inventory Tracking

Most businesses still rely on manual tracking and spreadsheets to get an overview of their inventory and its movement. Manual tracking involves physical cycle count which is time consuming. Lack of digitization and automation translates to frequent cycle counts that takes a lot of time, is prone to errors, and doesn’t provide real-time information about stock availability in the warehouse.

Out of sync inventory data can lead to missed sales opportunities or overstocking. Besides significant manual effort is expended in compiling inventory data in spreadsheets, and communicating those with various stakeholders.

Damage and Wastage Due to Lack of Expiry Insights

According to a landmark 2013 study, nearly 40% of the food produced in the United States ends up in the landfill. The same study shows that 21% of US landfills consist of expired food products. A lot of this comes from warehouses and storage centers where improper methods of storing and dispatching a product are followed. Due to inaccurate information about stock levels, warehouse managers can sometimes end up over-ordering a product. 

This causes the supply to exceed demand, and products get stuck on shelves for a long time. Such products end up expiring and become unsafe to use. Not following standard practices like the First In First Out dispatch method and real-time stock update also leads to older products being on the shelf while newer batches get dispatched.

The perishable goods industry usually suffers from this problem.  

Suboptimal Placement in the Warehouse

Visibility of stocks inside the warehouse is another major challenge faced by warehouse managers. Associates spend a lot of time moving around, trying to locate a specific item. Erroneous stock placement and management inside the warehouse results in higher retrieval and picking times as well. 

Not only does this slow down warehouse processes, but also delays shipments or leads to the dispatch of an incorrect order. This heavily impacts the customer experience, making them distrustful of your services. Even a slight delay in shipments can be a problem for time-sensitive items like medicines, disaster management equipment, or food products.

Overstocking Issues

Many warehouses, especially the small and medium-sized ones, tend to overstock products. Inefficient inventory management, inability to forecast market demands, ordering products in large quantities are some of the reasons that can lead to overstocking.

Overstocking results in deadstock, which can have a huge monetary impact on the warehouse as every item still on the shelf is a liability and blocks cash flow. Unsold products also end up taking valuable space, preventing warehouse owners from investing in something new and keeping up with the current market trend.

Understocking Products

Inefficient demand planning can lead to a stock-out situation where certain stocks are no longer available in the inventory. Customers wanting to purchase that item would either need to wait for long periods for it to be back in stock or shift to another vendor.

Nearly 34% of businesses have been found to deliver an order late as they unknowingly sold something that wasn’t available in their stock. All of this happens due to poor inventory visibility and inefficient reordering of stocks.

Manual Replenishment and Reordering

Manual replenishment and reordering are the key reasons causing overstocking or understocking. Warehouse managers need to continuously monitor the stock level on their own to get an idea about fast moving items and those that  are taking up unnecessary space. This manual oversight creates a logistical bottleneck, is slow and inefficient.

Inventory managers need to coordinate with multiple suppliers on different levels to ensure proper flow of inventory. Errors in record keeping, miscommunication, or delayed inspection can affect the warehouse’s ability to fulfill changing customer demands. Since same-day delivery is a reality these days, which cannot be achieved with reliance on manual operations.

What is an Inventory Management System?

An inventory management system combines daily processes occurring in a warehouse with modern technologies. Inventory management is an important aspect of supply chain management as it administers the movement of goods from manufacturers to warehouses and then finally to a customer. Inventory management systems improve the visibility of this movement by employing the use of advanced hardware and software.

Modern warehouses use hardware tools like barcode labels and scanners to track the exact movement of every SKU. A barcode contains essential information about the product and makes it easier to capture and store product details across silos of the supply chain. An inventory management software acts as the central hub for all this information. It also helps in analyzing data to keep an accurate inventory count to prevent over-stocking or under-stocking.

Warehouses can realize a lot of benefits by adopting a robust inventory management system in their business processes. Enhanced visibility and improved inventory management can help in reducing costs, optimize fulfillment operation, prevent theft and product spoilage, enhance customer experience, forecast future market trends and a lot more.

How inventory management systems address typical pain points?

Real-time inventory visibility

With inventory management software, warehouses can improve their inventory visibility across supply chains or in-house. Warehouse managers will have granular SKU level visibility at their fingertips and will be better equipped for taking efficient business decisions. Integration of smart shelves, drones, cameras, and other IoT-enabled devices in the warehouse can provide accurate inventory information in real-time.

Effective inventory tracking will help warehouses to reduce operational costs and cut down on dead stocks. Expired products offer no value to you or the customer, while slow-moving stocks end up costing more money in storage than they would have earned after sales. Insight about the stock level is also essential for preventing overstocking or understocking scenarios. Managers will have accurate information about depleting SKUs that need to be reordered, products that aren’t selling, and products that are in high customer demand.

Being on top of stock levels and market trends will give your business an edge over competitors. 

Audit and Compliance

From receiving a shipment to final dispatch, a typical inventory management process contains a lot of moving parts. Inventory audits are an essential component of an well managed business. , However, they can be extremely time-consuming often hindering compliance process.

Some of the best inventory management software offer superior audit and compliance abilities to your warehouse. They enable real-time inventory tracking and comprehensive SKU audit trail from receipt to dispatch.. They also aid in reducing human intervention, to make audit less time consuming.

Frequent auditing keeps managers aware of their inventory status and helps them comply with different government regulations easily. We enable warehouses to follow best practices like First Expiry First Out (FEFO), First In First Out (FIFO), and Last In First Out (LIFO) for perishable products and consumables.  

Dynamic Inventory Optimization

Manual reordering and replenishment of stocks is a time-consuming and error-prone process. Advanced warehouse softwares enable dynamic Inventory  by leveraging AI algorithms to maintain minimum and maximum stock levels dynamically. The intelligent system will notify warehouse managers if the stock of a certain SKU  is going below the threshold level or if it has exceeded the optimal level and shouldn’t be ordered further.

Managers will no longer need to move around the warehouse to keep a record of every stock manually. They can instead focus on better planning of inventory replenishment based on customer trends and maximize profitability. 

Inventory Placement

Cargo unloading is the first thing that happens after a shipment is received. It is followed by the arrangement of products on their respective shelves. This is an important step as proper placement of products can save valuable search time for an associate during picking while fulfilling an order. Warehouse inventory management software helps optimize the product placement by using automated machine learning-driven ABC analysis.

The machine learning algorithm will then automatically identify an item according to the criteria it fulfills and suggest the class it fits in. This will eliminate the need for manual classification and the concerned item can then be placed in an optimal location based on the frequency with which it is ordered. A routing algorithm can also map the shortest way for an employee to retrieve an item, saving valuable time in dock-to-stock and pick-to-ship cycles.

Hopstack could be the best Inventory Management System for your business

Hopstack's cloud-based digital warehouse software automates and digitizes your warehouse by easily integrating with robots, ERP, and WMS. 

From reducing software deployment time, increasing efficiency of existing resources, to increasing warehouse throughput, Hopstack not only reduces onboarding, training, and payroll costs but makes your inventory smarter.

Here are the main features of our inventory management software. 

Next steps

Making the right decision about which inventory management software to purchase is an important one since it can directly impact the growth of your business. If you would like to know more information about how Hopstack can help your business.
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