Suppose you’re running a bar, pub, or any other establishment that sells plenty of beverages and snacks. In that case, you’re probably already aware of one of the most tiresome and time-consuming jobs to do in that industry: Inventory management. As a result, you’re going to need to raise the “bar” (yes, pun intended) when you’re doing your inventory tracking so that you can focus more on the areas that need the work.
Although we agree that using the more traditional methods would be more comfortable to use since that’s what you’re already accustomed to, it would feel a lot more at home. However, with the technological advancements that we have in our society today, don’t you think that it’s time to adapt to the rapid change that’s going on around you, especially since inventory tracking would be a field rich for human error!
What Is Inventory Management and Tracking?
Inventory management is quite literal with the name that it has. You’re going to be managing your inventory from ordering new stock to putting them away in your storage and finally using them when you need to. This can be done for all of the different components, raw materials, and finished products.
If you’re running the business, then you’re probably going to think about the different inventory management techniques like the just-in-time method or “JIT” for short. Though you don’t have to be limited to that, if you’d like, you could even go for the materials requirement planning method or MRP for short if you’re more supportive of computerized management.
The Different Inventory Management Techniques
Depending on the workload, the size of your company, and the product/s being sold, the type of inventory management you will need will change. It could also depend on your choice if you’re running the business and you want to avoid compiling waste. Or perhaps you’re keener on a more schedule-based management technique where the days in which your business takes to use the inventory will be calculated?
The Just-In-Time Management Method
This is probably the optimized method(by the Japanese in Toyota Motors) for producing the least amount of waste when creating their products. It allows companies to save lots of storage space and money by decreasing the number of components they would need and instead focus more on reaching a quota. This method then allows for liquidating or discarding their excess components and materials.
Although this is quite a suitable inventory management method, it might be risky for your business if the demand for your products suddenly skyrockets and your manufacturers can’t meet the supply that your business needs. So if you can’t meet your customer’s wants, it will damage and hurt your reputation and might even cost you their loyalty.
The Materials Requirement Planning Method
This method can be simply executed as long as you have accurate data and records on your sales with your products. Meaning, the MRP method is heavily dependent on your sales forecast. With the materials requirement planning method, you can develop a better relationship with your manufacturers, which is a great bonus to have, along with solid inventory management.
Once your manufacturers have accurate records for all of the sales your company has had, they, along with you, can calculate an average for all of the components and raw materials they need to produce. Don’t get mistaken. What they restock for your inventory should only be what you need. The extras are all up to you.
The Economic Order Quantity Method
The economic order quantity method will require you to do some maths and make sure that all of your stocks for components and raw materials are all filled up to the brim. Meaning, you’re going to have to set a limit for the stocks that you do want in your inventory for there to be a “brim” in your storage.
The way this method works is, you’re going to calculate how much of your raw materials and components have been subtracted throughout the week or month. So with your next batch of orders, you will only replenish the stock to the particular limit you’ve already set. No extra orders, no excess, and waste.
The Days Of Sales Inventory Method
This method allows you to count the average number of days it takes your business to “turn over” the stock. This includes the finished products, and the products are still in progress. The DSI is more like a ratio that you want to keep at a low figure – the lower your ratio is, the better. This means that your business requires fewer days to turn over its stock.
Takeaway
Depending on your business, workload, and product demands, you’re going to carefully consider which inventory management technique you’re going to apply to your company. If you constantly switch between the many techniques, it would mean that your business is struggling to turn over its stock because of low demand for what you’re selling!
You may be interested in: Billing and Inventory Management Software