Today, inventory management has become vital for the survival of an organization. If you don’t have good control over your inventory, the day is not far when you will lose control of your profits.

Nearly 81% of consumers experienced an “out-of-stock” situation in the past 12 months, resulting in lost sales for retailers and lots of disappointment for in-store shoppers.

Globally, retailers recorded losses of a whopping $1.75 trillion due to mismanaged inventory.

If you are still managing your inventory on a spreadsheet or worse, not managing at all, then your business might be suffering and it’s high time that you streamline your inventory management processes.

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In this article, we will tell you why you need inventory management. Before that, let us explain to you what is inventory management.

What is Inventory Management?

In simple terms, inventory management is a set of all those processes which you utilize to oversee and organize your goods or materials in your facility.

A component of

It involves a retailer seeking to acquire and maintain a proper merchandise assortment while managing orders, logistics, returns, and related costs are kept in check.

Why do you need Inventory Management?

It is crucial for an organization today to understand its inventory to achieve both efficient and fast operations, that too, at an affordable cost.

An effective management of inventory helps in reducing costs which further keeps accounts and finances in check.

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How inventory management solution can help?


1. Tracking Inventory

A good system will help you keep track of your inventory and offer a centralized view of stock across sales channels – how much is in stock, and where. It will also allow allocating inventory to specific sales channels, which is important if you have warehouses and distribution centers at multiple locations, thus, enabling

2. Control Your Costs

Keeping reports about your inventory helps you understand what stocks are doing well, versus which are just taking up shelf space. Lack of the right inventory at the right time can mean back orders, excess inventory, etc. These drive up costs.

3. Improve Your Delivery

Late delivery due to stock-outs is bound to give you a bad reputation. For tracking, it is important for you to know when the vendor is shipping inventory and when it will arrive. This helps you manage customer expectations by delivery as, when and where they want.

4. Manage Planning & Forecasting

The software can help you improve demand forecasting by analyzing data trends from well-performing stocks. This minimizes your holding and handling costs, improves revenues and frees up cash flows. Also, by planning and forecasting – you deliver on customer expectations better.

5. Reduce the Time for Managing Inventory

With a good inventory management solution, you can reduce the time taken to keep track of all the products you have on hand and on order. Additionally, you save the time taken up in inventory recounts if your records are in place.

In Summary

Today, inventory management has become vital for the survival of an organization. If you don’t have good control over your inventory, the day is not far when you will lose control of your profits. Don’t let inventory excess or shortages decide your future.

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Nearly 81% of consumers experienced an “out-of-stock” situation in the past 12 months, resulting in lost sales for retailers and lots of disappointment for in-store shoppers.Globally, retailers recorded losses of a whopping $1.75 trillion due to mismanaged inventory.If you are still managing your inventory on a spreadsheet or worse, not managing at all, then your business might be suffering and it’s high time that you streamline your inventory management processes.Managing inventory can be very challenging, and when you are a growing business it can be really painful. If you are facing issues in tracking your inventory and if it is getting difficult for you to optimize your warehouses and storage facilities then you have come to the right place.In this article, we will tell you why you need inventory management. Before that, let us explain to you what is inventory management.In simple terms, inventory management is a set of all those processes which you utilize to oversee and organize your goods or materials in your facility.A component of supply chain management , inventory management supervises the flow of goods from manufacturers to warehouses and from these facilities to point of sale.It involves a retailer seeking to acquire and maintain a proper merchandise assortment while managing orders, logistics, returns, and related costs are kept in check.It is crucial for an organization today to understand its inventory to achieve both efficient and fast operations, that too, at an affordable cost.An effective management of inventory helps in reducing costs which further keeps accounts and finances in check.From a customer’s point of view, it helps you to provide better customer services through fast delivery and low shipping charges, hence, meeting customer expectations.A good system will help you keep track of your inventory and offer a centralized view of stock across sales channels – how much is in stock, and where. It will also allow allocating inventory to specific sales channels, which is important if you have warehouses and distribution centers at multiple locations, thus, enabling warehouse management Keeping reports about your inventory helps you understand what stocks are doing well, versus which are just taking up shelf space. Lack of the right inventory at the right time can mean back orders, excess inventory, etc. These drive up costs.Late delivery due to stock-outs is bound to give you a bad reputation. For tracking, it is important for you to know when the vendor is shipping inventory and when it will arrive. This helps you manage customer expectations by delivery as, when and where they want.The software can help you improve demand forecasting by analyzing data trends from well-performing stocks. This minimizes your holding and handling costs, improves revenues and frees up cash flows. Also, by planning and forecasting – you deliver on customer expectations better.With a good inventory management solution, you can reduce the time taken to keep track of all the products you have on hand and on order. Additionally, you save the time taken up in inventory recounts if your records are in place.Today, inventory management has become vital for the survival of an organization. If you don’t have good control over your inventory, the day is not far when you will lose control of your profits. Don’t let inventory excess or shortages decide your future. Invest in a good inventory management solution

Tips to improve your business

Business improvement strategies help identify parts of your business that need to be refined or could perform better.

There are various strategies that are useful for identifying where you could improve, including methodologies, tools, actions and activities that focus on different parts of your business.

Improving one area in your business will often have positive flow-on effects for other areas as well.

On this page

Types of improvement

As your business changes, you will need to assess areas of improvement across your business to ensure it is running and operating at its full potential.

These areas include:

• management (e.g. leadership and change management)
• marketing and promotion
• products and services
• customer service
• financial (e.g. improving profit, cash flow, capital sources and revenue management)
• IT and other digital resources
• human resources
• quality (e.g. manufacturing or service)
• environmental
• processes.

Stages of improvement tasks

There are steps you can take to plan continual improvement tasks in stages so you gain a high-level view of what can be improved and how it can be adapted and changed.

How you can improve your business

There are various methodologies, tools, actions and activities you can use to assess and improve your business.

Consider the following to improve your business.

Methodologies

• Process improvement strategies (explained below)
• Industry benchmarking
• Staffing changes
• Marketing vision changes
• Products and service updates

Tools

• SWOT analysis
• Benchmark analysis
• Trend analysis
• SIPOC

Actions

• Innovation planning for products and services
• Training and development for you and your staff

Activities

• Professional development for staff
• Networking events and expos
• Mentor opportunities
• Professional service arrangements

Process improvement

As your business grows, you will have many processes that have been developed organically and may be inefficient. Having strategies in place can help to improve them.

Process improvement is a method that works across all areas of your business and can benefit operations by lowering costs and increasing capacities for overall growth. Some areas of improvements you might start with include:

• improving communication between your staff
• delivering your services faster
• improving the quality of your manufacturing
• resolving known problems
• improving your customer experience
• reducing your costs and debt.

Process mapping

Process mapping is a technique that shows the steps of how a process should work from start to finish as a visual map—these are sometimes referred to as workflow diagrams.

Process mapping includes:

• explanation of the tasks
• who is accountable for the tasks
• a timeline of when each task should occur.

Digital tools like a business process management (BPM) system can help develop process mapping.

Flow charts, process diagrams and training is available through LinkedIn Learning and is free with State Library of Queensland membership.

SIPOC

SIPOC (suppliers, inputs, process, outputs, customers) is a visual tool used to document a business process from beginning to end and can improve compliance with industry standards and codes of practice.

Using this tool with your team will help to eliminate redundancies, reduce confusion and errors, and be easier for staff to follow.

SIPOC example

In this SIPOC table, you can see where the goals and the gaps are with the productivity of baristas in a coffee shop.

Productivity equals the total value of the work divided by the total hours worked—in this case, the number of coffees made by the baristas divided by the total hours the baristas worked.

Example SIPOC table

Suppliers

Inputs

Processes

Outputs

Customers

Suppliers:

• Coffee bean roasters
• Cups, stirrers
• Milks and milk alternatives
• Sugar and sugar alternatives
• Coffee machine service

Inputs:

• Beans
• Staff (baristas)

Processes:

• Take order
• Accept payment
• Grind beans
• Place grounds into the portafilter
• Connect portafilter to the coffee machine
• Place cups underneath
• Start machine
• Put lid on cup
• Hand to customer

Outputs:

• Cup of coffee that tastes good and satisfies the customer

Customers:

• Customers return and bring their friends

The diagram has identified that several steps may be missing in the process that could improve it. The following questions explores this further.

• Who takes the order? Is that part of the barista's job? Should that be included in the productivity calculation?
• How is the money taken and by whom?
• How fine is the grind? Does it get adjusted? If so, when and by whom?
• When is the milk added?
• Does the barista add sugar or the customer?
• When does the machine get cleaned and who cleans it?
• How is the quality of the coffee checked to make sure it is good?

Once the process is mapped and you have identified what is functioning well, what the process gaps are and what tasks can be streamlined, you can refine the tasks into manageable steps.

Regular process refinements bring the business closer to the desired results of better productivity of baristas by increasing the number of good coffees that can be made during a barista’s shift. Also, adding more staff to customer service and sales may be a good investment.

Complete a SIPOC assessment

Use the tool below to map out an activity from your business to determine if any improvements can be made.

Interactive SIPOC table

Suppliers

Inputs

Processes

Outputs

Customers

Suppliers:

Inputs:

Processes:

Outputs:

Customers:

Also consider...

• Last reviewed: 8 Dec 2022

• Last updated: 28 Jun 2023