A guide to inventory management

Efficient operations rely on inventory management - the systematic process of overseeing and managing a company’s stock levels, availability, cost and distribution from manufacturers to warehouses and the point of sale. Tracking inventory helps companies identify and respond to marketplace trends. This ensures that there is always the right amount of product without overselling to customers or overspending on production.

Why is inventory management important?

Balancing inventory levels within a supply chain company is a challenge that faces many risks. Overselling inventory that you don’t have lowers customer satisfaction which results in lower customer retention rates. According to a study done by Hubspot, 94% of consumers claimed they were likely to return to a company that they had good customer experience with. Efficient inventory management allows companies to monitor and track the inventory levels so they know how to adjust based on demand.

On the other hand, having too much inventory also creates risk. Having too much in stock takes up unnecessary space, reduces available cash, promotes non-sustainable practices and raises the risk of warehouse inventory theft. Based on research conducted by Deep Sentinel, warehouses and distribution centers are reported as the number one location for theft.

Especially in a sector like agriculture, inventory safety is crucial. Aside from the other factors like space, money, and theft, agricultural products have to withstand time and the elements. Food perishes and could get contaminated and affect other products. Tracking your inventory guides a company in knowing how much to buy and sell, preventing these risks so there isn’t too much or too little in storage.

Steps of the inventory management process

Effective inventory management goes beyond recognizing its significance; understanding the steps involved is equally critical in establishing a successful system and mitigating potential risks. In most standard cases, the process starts when a product arrives at the warehouse.

Inspection and verification process

The first step after receiving a product from a supplier is to inspect it. Check that the quantity is correct and that the quality and handling conditions are up to standard. For perishable products, factors like temperature and proper storage containers should be inspected.

Sorting and strategic storage

Once the products have been thoroughly inspected, it’s time to sort them accordingly and properly store them. With a strategic warehouse management system, you can optimize your inventory process by making products accessible and efficient to find.

Updating inventory levels

At this point, it’s best to record your inventory levels now that they have been restocked. Regularly measuring and recording the levels of inventory helps prevent shortages and waste.

Accepting and verifying new orders

Now that the products have been put away and recorded, new orders placed by customers can be approved. Within this step, customers should be verified, inventory checked and orders confirmed. This is the first direct contact with the customers so creating a smooth experience is important in building a lasting impression.

Optimizing order fulfillment

After the order and inventory availability have been verified and documented, pickers will go through and actually package the order to ship it. Having optimized systems placed within the warehouse system reduces the time workers have to spend on retrieving items and then packing and shipping them. When pulling orders, follow the practice of FIFO (first in, first out). This method rotates the inventory so the older product will be used before fresher items.

Restocking inventory

By documenting the inventory in and output throughout the process, restocking should be straightforward. The data will show trends based on what has gone in vs. out over certain periods of time. This information will help guide managers on how to restock accordingly. It’s important to keep trends in mind, because times and environments change. Reordering the same amount over and over again, won’t always be the most effective choice.

Optimizing agricultural inventory

Adequate inventory management makes a significant impact on the success of fulfillment operations. It balances customer satisfaction and risk mitigation, both of which play a major role in sectors specifically like agriculture.

Outlining the inventory management process highlights the importance of each step in developing a successful journey for the products and customers. Understanding the steps and mastering the skills needed to execute them help businesses in optimizing resources, enhancing customer experiences, and ensuring lasting success.