An essential part of the supply chain, inventory management and analysis involves monitoring and controlling stock levels. From overseeing purchases from suppliers to counting sales and ensuring there is enough stock to fulfil all sales and orders, it’s critical to the smooth running of any business.
Logistics is a long process incorporating the entire supply chain, warehousing, international transport and last-mile delivery. In such a busy world – and even more so in times like these – it can be easy to lose sight of other business-critical tasks, like inventory management.
Inventory analysis and management can be done in many different ways, depending on your business. Three of the most common ways include:
Economic order quantity
Also known as EOQ, Economic Order Quantity is a formula for the ideal order quantity a company needs to purchase for its inventory. It aims to minimise costs by minimising buying, freeing up any cash tied up in the inventory by taking into account a wide range of variables, from production cost to demand rate.
Minimum order quantity
MOQ is the smallest amount of stock you can buy, usually set by the supplier as the lowest amount of goods they’re willing to sell. High-cost items often have a smaller MOQ, unlike cheaper items which can be mass-produced at a low cost.
By dividing your inventory into three categories, A, B and C, it’s possible to identify the items having the biggest impact on your overall inventory cost. An example of ABC analysis would be defining category A as most valuable products (contributing heavily to overall profit), category C as the low-value transactions (still valuable but less important to company overall) and category B as the products somewhere in between A and C.
Just-in-time inventory management.
As the name suggests, JIT inventory management orders materials and goods according to production schedules to ensure goods aren’t kept in storage but are used almost as soon as they arrive. This keeps inventory costs very low and minimises dead stock.
For businesses of any size, ensuring the right size inventory is the key to fulfilling orders efficiently. Too little stock can result in delays and unhappy customers; too much and you may incur unwanted overheads for the additional storage required.
Clear visibility of stock levels, as well as into orders, transactions and storage, can be hugely beneficial for companies looking to achieve long-term growth. Many businesses rely on software to automate their inventory analysis and management; inventory management systems track the lifecycle of inventory and stock as it enters and leaves – often in real time.
Other companies may choose to manually monitor stock using barcodes and scanners, which can increase the efficiency of pick up routes and maintain accurate stock levels. This data can often be integrated with other software – for example, point of sale or shipping information – for a seamless overall process.
Effective inventory management
If you can analyse your inventory and manage it well, the entire supply chain tends to fall into place and supply chain management becomes less taxing. Without proper visibility of your inventory, you risk overstocking, understocking, poor warehouse management and even mis-shipments – all of which come at a cost.
The pandemic has fuelled the increasing importance of proper inventory management and analysis, as both businesses and logistics services have had to ensure they can respond to disruptions and shortages with agility and resilience. Effective inventory management enables companies to predict and respond to even unexpected circumstances.
For support with inventory analysis and management, or help with warehousing and other supply chain management tasks, Sprint Logistics can offer expert guidance and advice on storing, shipping and managing inventory – get in touch today to see how we can help you.