Inventory Management: Smarter Decisions. Better Results.
A good starting point for this article is to outline the difference between Inventory and Stock.
Inventory is raw material and Stock is a finished good, ready to be sold. The key element here is that stock is ready to be sold.
Off course, across your upstream and downstream supply chain, Stock for one company will be Inventory for the other and vice versa.
If you are tracking finished goods, for example if you are renting equipment or items important to run your business, then it is Inventory or Asset Tracking. The reason – it is not your stock. The definition of stock is finished goods ready to be sold, so since you are just renting or tracking movement of your assets, it falls under Inventory Management. Tracking items that are not sold is Asset Tracking, the reason being the items are your assets and will need to be reflected on your balance sheet.
Given that driving your inventory costs down and optimising your inventory levels is the key role of the inventory management feature within your asset management software, the inventory management feature should provide an opportunity to increase your profits by:
#1. INVENTORY DEMAND MANAGEMENT
Your software should take you out of the inventory forecasting dilemma and give you confidence in your current and future inventory levels.
“Excess inventory was the main driver of Hewlett-Packard’s PC costs;
one year, in fact, inventory-driven costs equalled the PC business’s total operating margin.”
In some cases, it is necessary to reconcile your sales forecast with your inventory forecast. If this is the case for your business, then you may want to consider asset management software that integrates with your CRM software or ERP software.
As you know, Forecasting is a combination of Art and Science, your software is the science bit and you are the art bit (both need to be switched on and data-oriented).
#2. MINIMISE INVENTORY MOVEMENT
Inventory Putaway, Picking and Transfers should be carefully thought through. Any inventory movement should be in-line not only with your sales forecasts but also with your inventory movement costs. As a general rule, high ticket items should have zero warehouse movement. Consider re-organisation of floor plan or warehouse locations if it will minimise your inventory movement. Reduction in inventory movement has a significant impact on asset loss and theft too.
#3. INVENTORY ROTATION
The key here is balance and alignment between your sales forecast and inventory forecast. Your asset management software should be able to define the success level for optimal inventory rotation. This is especially the case if you are renting your inventory and your business is cyclic.
#4. TRACK YOUR ASSETS OR INVENTORY EFFECTIVELY
Asset tracking for fixed assets can be done by two ways – Barcode and RFID. Following is a comparison table between the two technologies:
|Asset Tracking Distance||15 ft – The barcode should be in line of sight||Up to 250 ft, the RFID tags need not be in line of sight|
|Asset Tracking Speed||Tracking rate is one barcode at a time||Tracking rate can be as high as 35 RFID labels simultaneously|
|Material Restrictions||None – Barcode works on almost all materials||RFID technology can be restrictive in metals and sometimes in liquids too|
|Accessibility||You can only read a barcode||You can read, write, edit and update RFID tags|
|Asset Tracking Accuracy||High||High|
|Human Intervention||You have to print labels frequently and they are labour-intensive.||Once set-up generally do not require any intervention|
|Level of Information||They just have basic product and manufacturer name||Can carry large amount of data – service history, order history etc|
|Security||Less secure than RFID as barcodes can easily be reproduced||Highly secure with comprehensive password and encryption features|
|Durability||Barcodes need to be readable by scanner so are on the outside of the asset, hence can be easily damaged.||RFID Tags are difficult to damage and can be within an asset so can be read in adverse environments|
|Costs||Fundamentally involves barcode labels, printer and scanner, cheaper than RFID||RFID is an expensive technology due to chip and wave technology.|
Asset Inventory Cost is almost one of the top five costs for every business, so it pays-off to configure the inventory management feature within your asset management software.