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Inventory management refers to a set of processes that involve managing the purchase, storage, and efficient selling of inventory. This includes all types of inventory, including raw materials and finished products. Its purpose is to promote cash flow in the business by ensuring a balanced stock amount is always available to fulfill customer demand. It can help save money in the long run. It is a vital component of the supply chain as businesses must carefully create a balance between the cash in hand, the ever-changing customer demand, and the storage space available. Inventory management is an irreplaceable set of activities for any business that deals with inventory.
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Inventory management is a requirement for many businesses because of compliance. For example, public companies must track their inventory to comply with the SEC (Securities and Exchange Commission) rules and the SOX (Sarbanes-Oxley) Act. Apart from that, every business needs inventory management if they want to improve their cash flow, retrieve business intelligence, and maximize profits every day by reducing manual entry errors, preventing fraud, and promoting transparency in the business.
MSMEs should consider choosing an inventory management system because of the following benefits.
Inventory management ensures accurate order fulfillment because it boosts your planning capabilities. It helps you minimize the out-of-stock situation while ensuring you don’t have excess inventory of a particular type. Without an inventory system in place, this is an uphill task, and second-guessing does not work in managing inventory. A management system for inventory is the only way businesses can ensure they are capable of fulfilling customer orders timely and efficiently without any hassles and delays.
Inventory management saves company costs. With a robust inventory management system, you can precisely understand which inventory is needed, when, and to what level. This controls your expenditure and saves costs in the long run as you can properly plan and order as per your requirements. It prevents excess inventory from being transported and stored while also driving down other costs, such as labor costs, because you only keep what is selling.
The planning and ordering aspect form the backbone of inventory management because their success is what provides you with numerous benefits. You can plan better because you know which product is always in high demand and when. You order only the inventory that is required rather than ordering everything in the hope that everything will eventually sell. This control over what to order and then allows you to have a better hold over your finances and other aspects of your business. It also prevents overselling, which can damage your business’s reputation.
Inventory management saves time. If you do not have a proper system in place, you may be wasting precious time doing manual and tedious tasks that can be automated. When you start to manage inventory, you will save time as the tasks will be streamlined, and things will be more organized in your business in terms of stock at hand and order fulfillment.
At the end of the day, it is all about customer satisfaction because your business will thrive only when you are keeping your customers happy and satisfied. Inventory management precisely guarantees that. When your customers receive the orders timely, they are going to be satisfied with your service and are more likely to buy from your business again and again. They will become your loyal customers, and this will boost your business in a variety of ways. When you show exactly how much stock is available, this transparency will help them with their expectations
The way a warehouse is set up is also a vital part of inventory management. A disorganized warehouse poses many problems; inability to find items on time, increase in expired items due to lack of visibility, and unnecessary time wastage. When you have a management system in place, you can better organize the items in your warehouse. For instance, you can organize them based on customer demand, items that are often sold together, and items that will expire soon. This will drive down labor costs while ensuring proper order fulfillment.
Profits are tied to how well you manage your inventory and make use of the inventory available in your warehouses. When you have a clear understanding of which items are available and the customer's demand, you can make better decisions regarding your stock and how to sell it for better profits.
When you are working closely with suppliers, inventory management can ensure better terms. You will know which inventory is required and in what volume. You can relay this information to your suppliers, who in turn will provide the inventory you require timely. As you will know what products you need and how much of those products are required, you can negotiate with the suppliers to get better deals and discounts while also improving your profits. This improves your relationship with your suppliers as they are made aware of your requirements, and they will appreciate the transparency.
Inventory sitting in your warehouse does nothing good for your business because it is simply gathering dust. With the use of inventory management, you prevent your financial resources from getting blocked. You can fulfill orders better which means improved cash flow for your business while also driving down costs such as storing unsold inventory. This eliminates the chance of your inventory becoming obsolete and thereby wasting money.
Inventory management provides valuable insights that unveil trends, so you are prepared well in advance. This allows you to strategize and market to sell your inventory at profitable prices to customers who are willing to buy it. It also enables you to track products, their lifecycle, and their expiry dates. These insights mean better management and visibility into items stored in your warehouse.
Your success with inventory management depends on the software you choose. Here are three major factors to consider before choosing inventory management software.
The problems you are currently experiencing will give you a better idea of which type of inventory management software you should opt for. Think about all the issues that are plaguing your business. The reason why you should start with your problem statements is that you want the software to meet your demands and requirements. Many inventory management software systems exist, but all are not suitable for you. Some may be way too sophisticated for your small business, while others may provide only a few basic features. Hence evaluate carefully to choose the right inventory management solution for your business.
You can opt for a solo inventory management system that is going to take care of all the inventory-related activities. Or you can opt for an integrated system whereby the inventory management system is part of the ERP and other vital functions that are beneficial to your business. The benefits of an integrated system are manifold because, essentially, you are getting one package that has it all, thereby promoting the best type of business management. From bank reconciliation to inventory management and business reports, your business will get it all in one complete package. You won’t have to worry about managing these software tools separately.
An integrated solution like TallyPrime provides valuable insights into your business, thereby improving efficiency and promoting productivity.
Before you go ahead and choose an inventory management system, think about the major users who will benefit the most and the security features the software offers.
The inventory management system should provide support and be easy to use by everyone who is involved in the process. It should have how-to guides that explain thoroughly how a particular task must be done and what to do if a problem arises. It should provide expert support in case something goes wrong while using the software tool. The type of support and the level of support is important to consider especially when you use integrated software that has inventory management as a unit along with other important units. It will ensure you can work well with all the units without experiencing any issues.
TallyPrime is the best business management software for MSMEs that comes with s inventory management feature. TallyPrime is known for providing in-depth inventory reports such as order summary, re-order status report, stock transfers, batch summary, stock aging analysis, stock-item-wise profitability, movement analysis, and location summary, among other reports. This enables you to get a complete view of all inventory, thereby making it easy to manage your inventory by generating reports as and when you require. You can make informed key decisions that will have a positive impact on your business.
TallyPrime gives you the power to handle your business the way you wish. You can define several groups, locations, and categories as you require. This type of management puts the control in your hands as you are not limited by anything. This feature is particularly useful when you have many product lines and you want to categorize each separately. The flexible units of measure help you to handle real-time complications such as stock items being quantified in several units and so on. You also get a Bill of Material feature in the software that gives a precise view of all components.
Inventory management with TallyPrime is simple because of its easy-to-follow guides. You can set the re-order levels to get instantly notified when a stock is running low and requires replenishment. You can also set a stock valuation method for every item as you need to, such as LIFO perpetual, FIFO, monthly average cost, and FIFO perpetual, among others. TallyPrime’s job costing feature is another great addition to the inventory management unit, as it lets you zoom in on all the costs involved, thereby allowing you to determine where to cut costs. TallyPrime powers over 2 million businesses across the globe, making it among the most successful business management solutions.
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