One of the most valuable assets a business has is inventory.

Inventory management is key to keeping your industry running efficiently and organized.

With good inventory management, you can control everything that enters and leaves your company, and what is left and what is missing.

Thus, you can organize yourself so that production does not stop due to lack of materials or products and ensure that your company does not lose performance.

In this article you will see what inventory management is, why it is important and how to apply it in your business.

What is Inventory Management?

To optimize performance in businesses that deal with product inventories, whether raw materials, inputs or finished products, it is essential to implement inventory management.

With this approach, the company is able to efficiently organize and control the quantity of each product at a given time, characterizing inventory management.

Through this analysis, the company obtains a clear understanding of its product mix and its demands, which will be decisive for the purchase needs.

In addition, inventory management is related to the strategic value that inventory has for the company.

How important is Inventory Management?

There are many reasons why inventory management needs to be included in your company, among them, the influence on other sectors stands out.

By being aware of what's missing, what's left, what's ideal and what's wrong, controlling entries and identifying inventory turnover, it's possible to balance the purchasing, storage and delivery sector.

Having a warehouse full of goods is not synonymous with success, on the contrary, it means stagnant investment.

Inventory management aims to ensure the ideal stock, without excesses or shortages. Excess products may result in expired, deteriorated materials or lead to risks such as theft, loss or damage.

Stock shortages can cause production bottlenecks, decreasing the productivity of your company, increasing costs and the like.

How to improve inventory management in my industry?

Knowing that inventory management avoids risks and brings benefits, below you will see some tips to make inventory management more efficient in your industry.

inventory turnover

Inventory turnover is one of the performance indicators most relevant to inventory management. Attention must be paid to all aspects that can help or hinder the speed of turnover, such as purchasing, organizing stock, displaying products, promotions, customer service, delivery and the like.

Inventory  

To maintain the organization, it is essential to control the entry and exit of products. Therefore, stock inventory is essential for stock management to work.

Through it you will have control over the available quantity of each item and its financial value.

The benefit is to reduce production losses and inventory errors in addition to creating an organized inventory management culture.

You can know more questions like: what is a stock inventory and how to apply it by reading our article on this topic.

Codes to identify your products

Creating codes to identify products and materials will speed up their identification in everyday life.

Dividing them into groups and subgroups is also a good way to organize them.

Define the best aftermarket model

Defining which replacement model your industry will adopt makes it possible to create a standard between replacement intervals. The models are:

Continuous replenishment: In this model, orders are placed at the time when stock needs to be replenished.

Periodic replenishment: In this model, replacement is carried out by periodic appointments made by the company.

Maximum and minimum quantity of products in stock

Set a minimum and maximum quantity of products in stock. This step is important so that there is no excess or lack of products. Setting limits is essential for good inventory management.

Define processes and routines

In an industry, care with stock is even greater, since the handling of raw materials and semi-finished products is much greater.

Defining processes and routines prevents failures and errors, and if these processes are not well defined, the stock will certainly present problems.

Build an order forecast

Knowing the stock and having carried out an inventory, it is possible to assemble an order forecast, which will give you greater security in decision making. That way, you'll know what to buy, when to buy it, and how much to buy.

You can also make use of auxiliary tools, such as the kanban.

Most common inventory management methods

Inventory management is complex, knowing that, we bring here some of the most common methods used by companies to guide inventory management.

Are they:

PEPS

This is the management method most used by companies today. He advocates that older merchandise should be sold first, preventing items from becoming obsolete. From this principle comes the meaning of the acronym “FIPS”, “First In, First Out.”

UEPS

This methodology is the opposite of the previous one. The acronym UEPS stands for “Last In, First Out.”

To use this methodology, it is necessary to have elaborate control methods so that there are no damages or loss of products.

It is not a recommended methodology for companies that work with perishables.

The costs of goods sold are calculated by the value of the newest products, that is, this methodology makes the accounting profit of companies lower and, therefore, this practice is prohibited by the Federal Revenue Service for purposes of calculating Income Tax, and may be used only for managerial purposes.

Average Cost

This method renews inventory values each time there is a new entry of items, by calculating a weighted average.

For companies whose values of their inventory items do not suffer large fluctuations, this method is the most recommended. Even so, it is necessary to adopt additional controls to verify that the stock is not over or under valued.

It is worth remembering that the Average Cost and the PEPS are the only inventory management methods accepted by the Ministry of Finance for purposes of calculating Income Tax.

JUST IN TIME

This management method aims to reduce costs, making use of the stock in its minimum limit.

O just in time requires intense monitoring to ensure that the company does not lose sales opportunities because it is unable to meet demand due to lack of inventory.

For this method to work, the company needs to have good suppliers as partners, so that they can quickly meet demand at the necessary time.

support platform

To get more information about your production process, get to know your processes and routines, you can count on the help of BMS Manufacturing 360, a platform made to make the industry more efficient.

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