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A Closer Look At Inventory Management

Why is inventory management so critical? Inventory management means the sourcing, storing, and selling of inventory. Inventory includes the raw materials as well as the finished good. It may seem simple at first, but the larger your product-based organization is, the more complicated inventory management can get.

Your company’s specific inventory management needs will differ on the channels through which it sells products as well as the types of products it sells, and the resources required to make them. It typically includes everything from tracking raw materials from suppliers, maintaining a balanced stock, determining how much product you sell (and at what price), and fulfilling purchases from customers. The goal of inventory management is to have an efficient amount of stock in the right place, at the right time, for the best price for you and your customers.

Using an inventory management system could amplify your business in numerous ways. It can boost your end-to-end production, analyze and adjust lead times, forecast seasonal demand, and produce reports that strengthen your bottom line. It also aids you in achieving inventory accuracy.

Inventory accuracy involves more than simply counting how many materials you have on hand — it can affect your ability to fulfill orders. Without it, you may have deadstock, misplaced materials, and have the wrong number of products on hand. This means it’s that much easier to deliver a faulty or wrong product to the customer. Without an accurate inventory, you can’t properly track order fulfillment, prepare for expected sales, or know when to order more supplies.

This can place a tremendous burden on the bottom line of your company. Inventory issues are estimated to cost businesses $1.1 trillion every year. This is due to issues such as running out of stock, shrinkage (often without knowing the cause), and the expenses associated with holding costs.

Perhaps even more critical, sending a customer the wrong product can harm your company’s reputation. Further, you should consider taking on the additional expense of ensuring the correct shipment, as well as the time and expense of replacing the wrongly shipped one. That’s only one illustration of the importance of having a system that works for your company that maintains accuracy. Consult the accompanying resource below for more about this aspect of a business.

Infographic created by WSI, an eCommerce fullfillment provider

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