Much has been said about inventory management, but it is still not complete without a discussion of real-time inventory management.
Inventory is often proclaimed as a necessary evil, especially in the retail business. Who would want to risk losing a customer due to product shortages? If they want it, they should have enough to sell. But the classic question has always been how much is enough.
To understand its implications, the first understanding one must have is that inventory costs are not just what you see in everyday life. They extend well beyond day-to-day costs in the form of additional money you must invest to keep the business running. Inventory is the main consumer of cash.
What is real-time inventory management?
Real-time inventory management basically means managing inventory as it runs out. Much of this strategy relies on technology, so its initial cost scares some skeptics.
The technology involved is basically RFID chips and barcodes. They keep a record of all inventory that enters and leaves the store. The benefits of being able to do so can be many. All you need to do is make sure you have a few things in place. You will need to know:
How many units do I order?
How long does the supplier need to fulfill this order?
What point am I going to ask for?
Most retailers place orders within a certain time frame. They always seem to have enough of what is not in demand in the market.
It is important to understand the value that real-time information adds to a supply chain. You are not forecasting anything or relying on any assumptions.
Rather, you are reading the mind of the market and acting accordingly. At the same time, aside from inventory costs, you would also cut down a lot of storage and administrative costs as you wouldn’t need a huge warehouse or inventory clerk.
How does it work
Reduce fixed costs: Fixed costs are a burden on the retailer. They drain profits. With the help of a real-time inventory management system, you can reduce them to the minimum level. You can make your organization much more agile by virtually eliminating the purchasing department. They will not need to forecast demand or place orders. Everything you need to have your suppliers ready; the system will do the rest. Also, since it is largely automated, the chances of error are much lower. Machines are not as forgetful as humans.
It’s not uncommon to get stuck with products that your customers no longer want. Demands change faster than you think. Now imagine selling multiple variants of multiple products, you are sure to be stuck with unsold inventory. With real-time inventory management, you can gauge the pulse of the market by keeping track of what is being sold and when it needs to be ordered, thus keeping these costs to a minimum.
Eliminate Out of Stock: Stock-outs and shortages are the result of errors in forecasting demand. While most of the discussion above focused on reforming forecasting methods, real-time inventory management has taken on a new perspective. It eliminates the need for forecasting and thus eliminates all the errors associated with it. If demand is running fast, so does your order cycle. This is called supply chain flexibility.
Improve customer relationships: A recent study has exposed that there are some “universal customer expectations” that the customer expects from every salesperson they deal with. These are the maximum choice, the maximum value at the lowest price. With the help of real-time inventory management, you can easily offer all three.
Simplify work processes: Real-time inventory management significantly reduces the error rate. Since much of the work is automated, there is less chance of error. Furthermore, all of its processes are based on facts and not on projections.
How to choose?
There are many options available on the market today. Every business is different and therefore, by extension, the inventory needs of each of them are also unique. Real-time inventory management helps any business.
Modularity: It’s critical that the real-time inventory management solution you are looking for is modular. Modularity basically means the ability to choose the specific features you might want rather than taking the whole package.
Modularity is so important because these inventory management systems are a means of serving the interests of many organizations that have diverse business interests. You may not need half of your solution, but the other half can be invaluable to you. So modularity allows you to choose the solution you think is best.
Ease of implementation: Inventory management systems are easier to acquire than to implement. Many of these systems are complex and require staff training, or sometimes you may need to hire new staff skilled enough to handle this. So the choice is whether the system will save you enough money to offset the increased training costs and still be valuable. Don’t forget to consider the time value of money.
Integration: The ability to measure changes gives the manager the knowledge of what works and what does not, and it is this ability that should be leveraged to assess the efficiency of the inventory management system.
Therefore, it is essential that the system is integrated with accounting, human resources and other similar systems, which are generally used in an organization.
A very common mistake is to pull inventory reports from the new system and continue with financial and other reports in the old way. This gives an inaccurate position of the efficiency with which the materials, personnel, money and other resources are used.
At the end
Large companies and small companies generally have an efficiency gap between them, with larger companies being better. It is imperative for a small business to grow and prosper by adapting to gain a competitive advantage over smaller competitors.
Real-time inventory management is still a relatively unknown product. So unleash the potential of this powerful tool and gain a competitive advantage.