Inventory management has a direct impact on the operations of any manufacturing firm. The reason is that as your company expands and the demand for your products increases, you may find yourself dealing with inventory management issues. Note that inventory management inefficiencies and inaccuracies will not only impact your cash flow but will also deal a blow to your entire manufacturing process.
As such, you cannot afford to overlook the need to avoid overstocking and addressing the risk of running out of raw materials necessary for production. Underestimating the space you need to handle raw materials, work-in-progress, and finished goods can also pose challenges in one way or another.
Additionally, relying on outdated and unreliable systems can make maintaining correct inventory levels a nightmare for manufacturers. In that case, implementing appropriate inventory control strategies necessary if you want to realize profitability and gain a competitive edge as a manufacturer. Here are some of the inventory management tips worth considering.
Human error is a significant pain point in inventory management, and one cannot easily spot the same. The mistakes that people make have potential consequences in manufacturing operations when it comes to inventory management. You also need to understand that such a simple error like mistyping a figure in a report, can cause serious problems later on.
Managing inventory using Microsoft Access or Excel can be error-prone because it is disconnected and can quickly become out-of-date, leading to even more errors than what you were hoping to solve by having an inventory database. The solution, in this case, is implementing a manufacturing-specific production and inventory management tool. That is where cloud-based inventory management comes in. By doing so, you will reap the following benefits.
It is a fact that some products need more attention than others in most manufacturing operations. For that reason, you should consider using ABC analysis to prioritize your inventory management. That way, you can separate products that require a lot of attention from those that need less. You can achieve that by reviewing your product list in a bid to add each of your products to one of the categories below.
The financial impact of products is category A is significant, but the sales are unpredictable, which suggests that they need more attention. On the other hand, the smaller financial impact of products in category C means that they are constantly turning over, thus requiring less supervision. Category B represents products that fall somewhere between the other two.
The best way to identify potential problems in the case of inventory management is reviewing and conducting regular inventory audits. Committing time to this procedure each month is a wise idea if you want to cover your entire base, and inventory management software can help you validate your data. You also need to ensure that the quantities in the system match the physical count of goods on hand. The inventory audit methods you can deploy include;
Rather than opting to do a full count of your physical inventory at the end of the year, you can conduct cycle counting. That allows you to reconcile the number of products in your system and the actual number of products for an entire year. You can do cycle counting every day, week, or month, which involves checking different products in turns in line with a specific schedule.
Although various methods determine the number of times you count a product, there is a tendency to count higher value products more frequently.
When you decide to do a physical inventory, it means that you need to count all your inventory at once. Since accounting and income tax filing happens at the end of the year, most manufacturing firms do a physical inventory count around that time. Even though conducting physical inventory happens once a year, it is less efficient because it is very disruptive to manufacturing operations.
Sometimes, you may experience problems often when you opt for a full physical inventory at the end of the year, especially if you have many products. If that is the case, you should start spot-checking the entire year. That will call for choosing a product, calculating it, and comparing the result to the actual figure. There is no need to schedule a spot check, and this procedure is supplemental to physical inventory.
Ensuring that materials can move through production and distribution fosters effectiveness within the supply chain. You can achieve that by prioritizing relationships with external entities that make up different parts of your manufacturing firm's supply chain. In turn, that will bear a significant impact on the timeliness of material delivery or pick up from the plant.
As such, encouraging communication from the account managers in contact with suppliers and retailers should be part of your priorities. Such managers should frequently communicate with external establishments and report updates back to the plant for floor managers and inventory analysts to respond accordingly.
If you want to improve the performance of your manufacturing company, reduce variable costs, and maintain high customer service levels, efficient inventory management should be part of your priorities. Also, reinforcing inventory management is not a one-time project because it requires your attention from time to time.
Implementing the tips above can improve inventory management within your manufacturing entity. If you need more information on inventory management for manufacturers, contact us today!