For smart companies, a quality inventory management system is the lifeblood of liquidity, making sure that products and services do not stay on shelves for any longer than they have to. While this strategy is often central for new businesses, more static firms may not be making this enough of a priority. As a result, older companies may be inadvertently hemorrhaging money because their inventory management systems are inferior, e-commerce expert Dennis L. Prince wrote in The Online Seller earlier this month.
When organizations first seek out inventory control systems, often the first determining factor is return on investment, in which decision makers try to calculate if the system or software choice is a cost effective option. While this is a useful way to choose a solution, Prince said it often fails to take one key variable into account: time.
An old adage in business is that companies need to spend money to make it. So while organizations have to first procure the goods or products before later selling items for profit, the goods themselves are a potential liability. The longer a product sits on a shelf, the less liquid a company's assets are. As a result, Prince said the best inventory management system is one that only orders products when needed and does not accidentally create unneeded surplus.
"Consider, instead, establishing an inventory replenishment method that lets you invest in product only as it sells," he wrote. "This has been referred to as 'just in time' or JIT stock replenishment, used for decades by big companies who don't want to tie up too much cash in inventory. The key to JIT success is establishing a reliable source of supply that can get product to you quickly upon confirmation of an order. That fulfillment time should be captured in an 'order processing time' you quote to customers, allowing for supplier fulfillment and transit to the buyer."
For Inventory Management Success, Consider All Available Data Capture Methods
A quality inventory management program can determine the success of a business, but first decision makers need quality oversight over their supplies. For small companies, a manual data collection system may suffice since the number of goods being tracked is relatively miniscule. For businesses with larger stores, electronic data capture solutions that use barcode scanner software may be more suitable for accurately tracking goods, according to Demand Media's Kenneth Hamlett, a former supply chain business solutions analyst.
"Barcode technology facilitates the movement of inventory within the confines of the warehouse (from one location to another) or from the supplier to the warehouse (receiving) and from the warehouse to the customer (picking, packing and shipping)," he wrote.