Inventory management is a problem that many businesses face. Indeed, good inventory management is essential to ensure the sustainability of a company due to its significant impact on its cash flow . However, stock management is not necessarily easy to implement, particularly in terms of choosing the method used.
So how can you improve your inventory management?
Here we will discuss the issues as well as the different inventory management methods that can be deployed in a company.
Inventory management: definition
Inventory management is a set of methods used by businesses to understand order quantity and time. The goal is to balance low-cost storage costs with high-volume customer responsiveness.
The challenges of inventory management
It is the best choice for expensive and/or perishable products that are regularly sold or consumed. Every time the purchasing manager needs to place an order, he will check the inventory and remaining quantity in the order to restore the predefined maximum stock level.
Reorder point method
The second method of inventory management is the opposite of the previous method. Also known as the “just-in-time” method, it makes the order date variable but the purchase quantity fixed. To this end, inventory managers rely on critical stocks. After reaching this threshold, immediately place an order to restock the business with a predefined and always the same quantity. Please note, once the critical threshold is reached, it is necessary to determine whether the company has sufficient production capacity and therefore meet customer needs until the goods arrive. If the answer is no, then the manager must accelerate the increase in critical thresholds so that the company can continue to meet demand while delivering the product.
Choosing your Billing Software
The second method of inventory management is the opposite of the previous method. Also known as the “just-in-time” method, it makes the order date variable but the purchase quantity fixed. To this end, inventory managers rely on critical stocks. After reaching this threshold, immediately place an order to restock the business with a predefined and always the same quantity. Please note, once the critical threshold is reached, it is necessary to determine whether the company has sufficient production capacity and therefore meet customer needs until the goods arrive. If the answer is no, then the manager must accelerate the increase in critical thresholds so that the company can continue to meet demand while delivering the product.
