Inventory Management

Cosys defines the term and why it's an essential practice

Inventory management refers to the continuous administration of a company's goods to ensure the availability of necessary materials and products. It is a subset of warehouse management, focusing specifically on organizing and managing warehouse activities and controlling inventory levels. A useful recent press release from automation and logistics company Cosys describes the term and its capabilities in detail.

Inventory management ensures that a company always has access to required materials and products. Initially, a warehouse is established to store these goods. The warehouse must be organized to allow quick and easy access to items while ensuring no goods are lost or damaged.

Inventory management is responsible for organizing the warehouse and controlling inventory levels. An item master record is created, documenting all goods in storage. Based on this inventory list, stock levels are continuously monitored and replenished as necessary. Thus, inventory management is crucial for businesses to maintain availability of essential products and materials.

The Importance of inventory management

Inventory management is fundamental to managing your inventory effectively. It helps keep track of your stock and ensures products are stored properly without damage.

Digital inventory management systems allow you to see exactly where items are located upon arrival and facilitate consolidating items onto specific warehouse locations. Withdrawals for relocations or dispatching are simplified, as optimal storage location suggestions are readily available. Besides simplifying warehouse operations, inventory management aids in restocking, inventory monitoring, and targeted stock clearance. Instead of manual counts, you receive all essential information clearly presented through a web interface.

Difference between inventory and stock control

Inventory management includes planning, monitoring, and controlling inventory levels, addressing both physical stock (e.g., in warehouses) and virtual stock (e.g., databases). The objective is to minimize inventory costs while ensuring product availability. Inventory management involves several key tasks:

• Stock Planning: Determines required quantities and timing, considering depletion rates (sales or production) and replenishment lead times, including safety stock planning.

• Monitoring Inventory Levels: Regularly verifying actual versus planned stock levels, investigating discrepancies when detected.

• Controlling Storage Costs: Minimizing expenses related to storing, retrieving, and moving goods, as well as costs due to inventory errors.

Objectives of inventory management

Inventory management is integral to internal business operations. Its primary goal is maintaining oversight of available goods and ensuring optimal stock levels to avoid shortages and downtime. Inventory management typically utilizes inventory management systems, which store detailed information about stored items, including item numbers, descriptions, storage locations, and inventory levels. Given the complexity, inventory management systems are often operated by external specialized companies.

Effective inventory management directly impacts a company's financial success, necessitating collaboration among departments such as purchasing, production, and sales. Only through coordinated efforts can timely procurement and delivery of necessary items be ensured.

Digital inventory management significantly simplifies warehouse staff tasks. Rather than manually updating material movements, handheld devices and apps capture each storage, relocation, and retrieval, providing real-time inventory data for improved decision-making and timely reordering.

Conducting inventory management

Inventory management involves monitoring and analyzing the company's stored goods. Its primary objectives are maximizing inventory value and minimizing associated risks, encompassing identification, valuation, control, and reporting on inventory.

The initial step in inventory management is determining current inventory value, typically accomplished through inventory counts capturing and valuing company assets. Differences between physical and recorded inventories frequently cause manual recounts, customer complaints, and lost sales due to unavailable goods. Digital material movement tracking via barcode scanning eliminates such discrepancies by providing daily updated inventory statuses.

The second step involves risk minimization through measures such as insurance or diversifying inventory. Inventory management software also reduces spoilage risk by enforcing FIFO (first-in, first-out) principles, preventing older stock from accumulating.

Thirdly, maintaining control requires regular inventory counts to prevent value depreciation. All inventory changes must be documented and analyzed to identify potential risks promptly. Continuous monitoring of inventory movements helps minimize discrepancies, enhancing inventory accuracy, improving delivery reliability, and providing a competitive advantage, attracting further customers.

Finally, regular inventory reports offer management essential insights for strategic decisions. These reports, accessible via web-based management interfaces, track item histories and inventory changes, providing up-to-date information on demand and supporting informed business decisions.