What is an Inventory Management System?
An inventory system is a process by which you can monitor your products throughout your entire supply chain. This supply chain process begins from purchasing to production and further finishes at the end sales. The entire process controls how you approach inventory management for your business.
Example of the Inventory Management System:
Suppose, that a person starts a business selling food hampers. He buys food in bulk from various suppliers. Some of them must be repackaged as per the requirement of his business. He creates a spreadsheet in Excel format which is always updated whenever any operation takes place like adding more stock, assembling hamper, or completing a sales process. This is a basic example of an Inventory Management System. The person must have complete and detailed knowledge about how much stock is remaining for his use currently. What is he supposed to do with expired food products? Improving this basic system of inventory to an extremely organized structure and looking after its productivity and business performance is the real task of inventory management.
Why you require an Inventory Management System?
Any business that is based on the stock of items or products will need a mature and efficient system to accurately track and monitor it. Without such a system, your business can easily face terrible situations like out of stock scenarios or overstocked items not getting sold.
Inventory systems guide you about the information on the number of components or ingredients you need to create or assemble your end product. Without such information, you may end up in the loss of your business as your system will not be made to meet the odd situations like insufficient stock, etc.
There are so many inventory systems available in the market, which one you select and adopt is entirely up to you. Right from simple inventories to complex and comprehensive solutions you have a wide range to choose your choice of inventory system.
What are the Two Types of Inventory Systems?
Companies manage their inventory systems all over the world in two types which are listed below:
- Periodic Inventory
- Perpetual Inventory
1. What is the Periodic Inventory?
The periodic inventory is a way of managing stock that relies on the stock-taking completely. Those businesses which are utilizing periodic system count their stock continually, say after every 3 to 6 months. They verify stock accuracy so that they can check whether stock levels match up to the sales statistics.
2. What is the Perpetual Inventory?
The perpetual inventory system depends upon the tracking of stock levels as items are receipted, produced, sold, or returned to the store. In short, every operational task updates the inventory. The accuracy is extremely high as the updating of inventory is more frequent than the periodic inventory system.
What are the Possibilities of Perpetual Inventory System?
1. Spreadsheets Utilization:
Plenty of startup businesses follow this category of using spreadsheets. But it comes with a great disadvantage of human errors in complex calculations and other possible probability of mistakes.
Spreadsheets are very low in cost and can easily fulfill the very basic level of Inventory Management System.
You must have a backup of your spreadsheet because if the spreadsheet gets deleted by mistake you will lose all the data instantly. Also, human error is much probable in this type of perpetual inventory.
2. Basic Level of Inventory Management Software
A basic level of inventory management is made possible through software with simple pricing plans. Many cloud-based apps are working efficiently to provide the easy functionality of the perpetual inventory.
Most applications are cloud-based which do not need any physical storage and allows complete data encryption for the security of data.
Complex levels of inventory cannot be handled by a basic plan of software and you need to upgrade your plan for more modules and functionalities.
3. Dedicated Level of Inventory Management Software:
Tracking and controlling your inventory’s stock is made easier and simpler with the dedicated level of inventory management. You can easily monitor every type of reporting and can look into the insights of your business which helps you in better decision making.
It is indeed a very powerful and robust solution with an integrated approach and access to other essential modules. Such a system is fully scalable and flexible and fulfills all your needs.
A proper setup is required for the considerable functioning of the software. You may spend more to get this type of software for your business inventory management.
What is the Conclusive Notion?
Choosing the best inventory system is critically important as you need to be smart in the decision making of your business. SMACC provides you a cloud-based ERP software that allows cost-effectiveness and time-management to improve your business performance while organizing your inventory to the extreme level of perfection consequently.