Inventory management is important for the success of any manufacturer. For many young, scaling manufacturing businesses, it’s also a challenge — one that automation can help overcome. Before getting into how businesses can start digitizing their inventory processes, let’s clarify what we mean by inventory management.
What is manufacturing inventory management?
Manufacturing inventory management is the activity of ordering, processing, storing and selling raw materials, work in progress (i.e., partly produced goods) and finished goods. A key goal of inventory management is to ensure you have the required levels of inventory at each stage of the production process. It’s about balancing demand with supply to minimize stock-outs on one hand and a glut of unsold goods on the other.
There can be significant costs associated with poor inventory management. Too little inventory can be costly in terms of lost sales, while too much inventory can occupy valuable space and resources that could otherwise be dedicated to other, faster moving goods. A glut of inventory also risks wastage, particularly for producers of perishable items such as food, beverages, health supplements and even cosmetics.
While knowing what you have, how it’s moving, and what you need are big parts of manufacturing inventory management, they are by no means the whole picture. Inventory management also involves understanding how the various costs impact your business. It’s part of the bigger picture of running your business, which is why inventory management software is so often integrated with accounting software and enterprise resource planning (ERP) solutions.
Why do inventory management?