Inventory Management: What Is It?

Stock management

Stock management is popularly referred to as inventory management. It is an element of supply chain management dealing with:

  • Product control
  • Controlling the available inventory
  • Inventory storage
  • Overseeing order inventory

Inventory management ensures that you have the right inventory when required, and at the right places. But what practices should you implement to guarantee quality results?

Calculating the Amount of Inventory that You Should Have In Stock

It is crucial to have in stock the right inventory amounts. Order too little, and your customers will move elsewhere. Order too much, and you may be stuck with the extra stock for months to come.

Even with an inventory management software, you will still need information from previous weeks. The data in the software will guide you to which products to add, and which ones to leave out.

You must, therefore, have reliable data, if you are to make the right purchases.

Determining the Right Prices for Your Stock

No one wants to pay more for a product unless they have to do so. But low prices are not always the ideal option.

A supplier could promise to provide you with a quantity break. The break may, however, require you to order more products so that you can enjoy the discount on offer.

The question to ask yourself is whether this is right for the company. You have to calculate the carrier costs, storage costs, and the increased risks that come with purchasing more stock than necessary.

An inventory management program will use the Economic Order Quantity to guide you on the number of units you should purchase. It keeps track of storage, holding, and order costs.

When Should You Purchase New Inventory?

It is a question many retailers struggle with. You have to make a calculated move to ensure that the new shipments will arrive on time.

If it arrives too early, it means you have to deal with added storage costs. Too late and you risk losing customers to other merchants. To decide when to make a reorder, you have to account for:

  • Lead time—this is the time it will take for your items to be shipped
  • Total time it will take to determine what is needed, and place orders for the same
  • Length of time it will take to pack and unpack the items

Inventory management can assist you in determining the amount of safety stock that should be in storage at any given time. Safety stock comes in handy when you run out of stock before the new shipment has arrived.