Inventory management is related to planning, procuring, storing and providing the appropriate material of right quality, right quantity at right place in right time so as to co-ordinate and schedule the production activity in an integrative way for an industrial undertaking.
It is a system & processes that identify inventory requirements, set targets, provide replenishment techniques and report actual and projected inventory status.
The goal of inventory management systems is to know where your inventory is at any given time and how much of it you have in order to manage inventory levels correctly.
Self-test to identify whether inventory management controls exist in the organisation:
i. Do you have a policy and procedure in place for inventory management control?
ii. Do you face shortage of inventory/variation of lead time to supply to the customer?
iii. Do you have surplus/dead/slow moving inventory?
iv. Do you have effective inventory management techniques?
v. Do you understand the business consequences if the financial investment in inventory is reduced to a certain level for over a period of time?
vi. Do you understand the key risk of non-maintaining the inventory as desired by goals of the organisation in a competitive environment?
vii. Do you perform cost analysis: Minimizing wastage, cost of planned inventory, emergency procurement, production rate charges of the specific order?
viii. Do you have adequate stacking norms to avoid mis-shipments, out of stocks, overstocks, mis-picks and so on.
If the above test are not satisfied, following would be a way to satisfy:
i. Maintenance of inventory register:
It is important to have a detailed inventory register. CARO requires reporting requirement on the quantitative details of the inventory. The register should include each and every item with its location where the inventory is stored.
ii. Stacking of Inventory and its classification:
Adequate stacking of inventory and its classification helps in tracking with better management. Proper stacking helps in effective supply-chain management.
iii. Warehouse management:
Proper warehouse management is a key. Mis-picks result from incorrect paper pick lists, disorganized shelf labels, or just a messy warehouse in general. Mis-shipments are a direct result of mis-picks at the beginning of the inventory process, and are also a result of a lack in quality control procedures. It could eliminate the possibility of duplicate orders.
iv. Inventory management techniques such as ABC analysis, Batch tracking, Six sigma, Lean six sigma and so on.
v. Cost analysis:
Level of mis-shipments, mis-picks; rate of out of stocks instances; quantum of dead stock/non-moving inventory; action of slow-moving inventory; inventory levels are creeping up but aren’t in line with the sales levels
vi. Physical verification of inventory on a periodic interval (say monthly), SOP should be in place, records of PV done should be maintained
The main goal of inventory management is to increase the visibility and organization of inventory activity via automated and streamlined pick/pack/ship features.
Inventory is the biggest asset of an organisation, so in order to save money and make money, there is a need to protect that asset and nurture it in the right direction. Without implementing inventory management techniques, it will be difficult to get ahead.