By Mansi Dupte
Published on - 6th November 2023
Inventory tracking, which includes the monitoring, management, and control of a company's inventory, is an essential activity in commercial operations. Whether the commodities are finished products, raw materials, or everything in between, a corporation may effectively manage its stock of goods by using this methodical and thorough approach. We'll go into great detail about inventory monitoring in this article, including its importance, techniques, and advantages.
Inventory Tracking is important for these 5 reasons:
1. Optimized Inventory Management: Businesses may balance having too much inventory and experiencing stockouts by using inventory tracking. Businesses may lower the risk of tying up resources in needless inventory or losing revenues because of product unavailability by regularly monitoring stock levels and making educated decisions about replenishing.
2. Accurate Financial Reporting: For the purposes of financial reporting and value, accurate inventory tracking is crucial. A company's financial sheet is directly impacted by the value of its inventory, which also affects profitability and shareholder views. Encouraging investors and maintaining compliance depend on accurate financial reporting.
3. Efficient Supply Chain Management: Products are available when and where they are required in the supply chain when inventory is tracked effectively. This reduces lead times, optimizes processes, and saves money overall in addition to minimizing interruptions.
4. Cost Management: Keeping track of inventory aids in efficient cost management. It lessens the chance of keeping slow-moving or outmoded inventory, which can result in large losses. Businesses may optimize their cost structure by using data to inform choices about pricing, reordering, and inventory levels.
5. Customer Satisfaction and Loyalty: Customer satisfaction is largely dependent on timely order fulfillment. Businesses may meet demand variations, rapidly fulfill customer requests, and lower the risk of disappointing consumers due to stockouts by using effective inventory tracking. Customers that are happy with a brand are more inclined to recommend it and make repeat purchases.
Hence, efficient inventory management is essential to running a profitable company. It affects customer happiness, cost control, supply chain efficiency, financial reporting, and inventory levels. Businesses must have a well-functioning inventory monitoring system in order to survive in a cutthroat market.
Here are 5 advantages of practicing Inventory Tracking that you should know about:
1. Enhanced Inventory Accuracy: Accuracy is increased by inventory tracking, which offers real-time data on stock levels. As a result, there are fewer mistakes, inconsistencies, and chances of overselling or understocking.
Example: To keep an eye on its flour supplies, a tiny bakery employs inventory management software. The system automatically creates a purchase order when the inventory hits a certain level. This guarantees a steady supply of flour without causing shortages or overorders, allowing baking operations to continue smoothly.
2. Improved Efficiency: Inventory tracking reduces the time and effort needed for inventory management by streamlining procedures. Thus, operating efficiency is raised.
Example: As an illustration, a car manufacturing line employs barcode scanning to track the delivery of necessary parts. When a component is delivered, workers scan it, and the system instantly changes the inventory. This results in a more efficient production process by doing away with the need for human record-keeping and guaranteeing that the appropriate parts are always accessible for assembly.
3. Cost Reduction: Businesses may minimize carrying costs and lower the danger of storing outmoded stock by using effective inventory tracking. Stock levels are optimized, which saves a lot of money.
Example: To monitor clothing products, a fashion shop uses RFID technology. They save storage space and reduce markdowns on out-of-date clothes by not over-purchasing hot products that could go out of style thanks to their real-time insight of client demand trends.
4. Enhanced Customer Satisfaction: Accurate inventory tracking enables prompt order fulfillment, which increases customer happiness. Customers that are happy with a brand are more inclined to stick with it and come back.
Example: To make sure that items are constantly in stock and prepared for quick distribution, an online retailer employs inventory tracking software. When orders are delivered on schedule, customers leave favorable reviews and make more purchases.
5. Informed Decision-Making: Real-time data from inventory tracking helps organizations make wise decisions. These choices might include everything from figuring up pricing strategies to choosing the best reorder points.
Example: Data from inventory tracking is used by a major grocery chain to manage its perishable inventory. Through vigilant monitoring of product freshness and timely order modifications, the store maximizes earnings while minimizing waste.
To sum up, inventory tracking has several benefits, such as better customer satisfaction, cost savings, efficiency gains, accuracy improvements, and the capacity to make well-informed decisions based on real-time data. These advantages are essential for companies in a variety of sectors to run smoothly and keep a competitive edge.
Various business sizes and types may be accommodated by the variety of inventory monitoring solutions available. Here, we examine 5 of these techniques with practical examples aimed at small companies, retailers, and wholesalers:
This methodology is straightforward and economical because it entails manually counting and documenting inventory items.
Examples: For Small Businesses: An illustration of a small business might be a local bookshop that counts its books by hand at the end of each month to make sure it is correct. For Retailer: To record and confirm the supply of expensive designer products, a boutique clothes store with limited inventory utilizes manual tracking. For Wholesaler: An illustration of a wholesaler would be a nearby food distributor that meticulously counts its perishable inventory to make sure it can quickly satisfy the various needs of eateries and shops.
Products are given barcodes, and goods are tracked using portable scanners. Every product has a distinct barcode, which makes tracking easy and precise.
Examples: For Small Businesses: Barcode scanning is used by a small craft brewery to keep an eye on its beer inventory and make sure the proper items are prepared for delivery to neighborhood bars. For Retailers: To make sure that the correct products are accessible for customers, a nearby electronics business tracks things on shelves and in the backroom using barcodes. For Wholesalers: Barcode technology is used by a wholesale office supply distributor to handle office managers' big purchases quickly and accurately, improving the tracking process.
RFID tags allow for wireless tracking when they are affixed to objects. This technique is renowned for its speed and precision.
Example: For Small Businesses: RFID tags are used by a small, family-run winery to track wine bottles in their storage basement, making sure that every bottle is present and immediately accessible for client orders. For Retailers: RFID technology is used by a mid-sized electronics shop to track expensive electronics products, avoiding theft and guaranteeing stock correctness. For Wholesalers: RFID technology is used by a wholesale distributor of automotive components to effectively manage their inventory, reducing mistakes in order fulfillment and saving time on manual counts.
Real-time visibility into inventory levels, automated data collecting, and sophisticated analytics for well-informed decision-making are all made possible by specialized software like Stock Register. Stock Register is best for small businesses, retailers, and wholesalers as well.
Examples: For Small Businesses: Inventory management software helps an online retailer of home décor keep track of its extensive product line, handle orders from suppliers, and maintain efficient e-commerce operations. For Retailers: Inventory management software is used by a local grocery chain to keep an eye on the supply of both perishable and non-perishable goods, which aids in maintaining steady inventory levels. For Wholesalers: Inventory management software is used by a wholesale distributor of electronic components to optimize inventory management procedures and effectively fulfill business client requests.
POS systems manage sales as well as real-time inventory tracking. As products are sold, they immediately update stock levels.
Examples: For Small Businesses: A POS system is used by a small toy business to manage its inventory and make sure that popular items are promptly reordered. For Retailers: POS systems are used by a local chain of apparel retailers to manage inventory at several sites and make the best restocking selections. For Wholesalers: Construction material wholesalers streamline inventory management and order processing for builders and contractors by integrating point-of-sale (POS) systems for their customers.
These illustrations show how different inventory monitoring techniques may be customized to meet the unique requirements of small companies, retailers, and wholesalers, helping them to manage their inventory more skillfully and run more smoothly.
A strong tool for centralizing inventory data, automating procedures, and enabling real-time visibility is inventory management software like Stock Register. By providing comprehensive insights and automating data collecting, it simplifies tracking.
Benefits: By decreasing mistakes and manual data entering, this program improves accuracy. It guarantees the most recent data on inventory levels, enabling more intelligent choices to be made regarding pricing, restocking, and reordering.
Example: To keep track of its wide assortment of items, a developing e-commerce company uses inventory management software. The program helps the company to efficiently satisfy consumer expectations and optimize inventory by automatically updating stock levels, generating reorder notifications, and providing insightful data on demand patterns.
Inventory items can be categorized using the ABC analysis approach according to their significance. Items categorized as "A" are the most valuable or quickly moving, "B" are of moderate importance, and "C" are less crucial.
Benefits: Businesses may make sure that their most valued or often sold products receive the most attention by focusing their tracking efforts on "A" items first. This tactic simplifies tracking procedures and maximizes resource allocation.
Example: To highlight its "A" items—high-end designer brands—a retail clothes store uses ABC analysis. To match client demand for these well-liked products, the business keeps optimal stock levels and tracks these items on a regular basis.
Utilizing electronic data interchange (EDI) to automate the sharing of order and inventory data is a necessary step in integrating with vendors and suppliers.
Benefits: By guaranteeing data consistency between your company and your suppliers, this integration expedites the tracking process. Order processing is automated, mistakes are decreased, and replenishment is accelerated.
Example: Using EDI, a manufacturing organization integrates with its principal suppliers. Orders are automatically sent to suppliers by the system when inventory levels fall below certain limits. This maximizes inventory tracking and management by guaranteeing that raw materials are constantly accessible for manufacturing.
Demand planning and forecasting entail estimating future product demand using data and techniques. This enables companies to get ready for changes in the demands of their clients.
Benefits: Businesses may improve inventory levels by comprehending seasonality and demand trends. To cut carrying costs, they might place larger orders for items ahead of times of strong demand and place smaller orders during slower periods.
Example: To get ready for the holidays, an online electronics merchant uses technologies for demand planning and forecasting. They make sure they have an adequate supply of popular devices throughout the hectic shopping season by examining past sales data and trends.
This technique entails performing routine audits to verify compliance with tracking protocols and provide ongoing training to personnel involved in inventory tracking.
Benefits: Employee proficiency in tracking methods is ensured by training and audits, which lowers mistakes and inconsistencies. Audits also support maintaining tracking accuracy and pointing up opportunities for development.
Example: An illustration would be a weekly training session held by a regional distribution facility for its employees. In order to maintain effective tracking, routine audits of inventory systems are also conducted to verify that inventory is accurate and that any inconsistencies are quickly resolved.
This is how inventory tracking can be done. I hope now you have understood what is inventory tracking, why is inventory tracking important, what are the 5 advantages of inventory tracking, what are the 5 inventory tracking methods, what are the 5 ways to improve inventory tracking, and everything you were looking for!
Thank you for reading!