Businesses are starting to get smart with their inventory. Take management software, for example – the industry is set to double between now and 2032.
Inventory is one of the essential elements of any business. And yet many people remain unaware of the different types and their uses.
Inventory can be a powerful tool for any business, from raw materials to finished goods, tracking stock and controlling costs.
This article will explore the different types of inventory. Learn how to track and manage your inventory and take your processes to the next level.
Overview of Inventory Control
Inventory control is a critical part of any business that deals in goods. It is the practice of tracking and managing the flow of goods and materials. Tracking happens from when they enter the company to when you sell and ship them.
It includes accurate record-keeping of how much inventory is on hand, when you need to replenish it, and when to allocate it.
Robust inventory control helps businesses support a healthy balance between having too much or too little stock. A well-managed inventory system can save money. It minimizes losses due to theft, spoilage, and overstocking.
That helps ensure a steady supply of goods to meet customer demand. That eliminates the need for emergency orders, which can be costly.
Inventory control involves various processes. That includes tracking the movement of goods. It also covers things like setting stock levels and conducting physical inventories.
Many businesses use tech nowadays to manage inventory. Standard tech includes barcoding, warehouse inventory management software, and automated tracking systems.
That helps businesses better manage their inventory. It helps them to see what they need to restock and when and spot early signs of issues.
Factors That Affect Inventory Levels
Many factors impact a business’s inventory level. First, you must consider the type of inventory. That includes raw materials, finished goods, or work in progress.
Secondly, the demand for products will also impact levels. Too much stock can increase storage costs, but too little could lose sales.
The business’s ability to accurately forecast sales will impact inventory. Any supply chain disruptions or delays could also impact inventory levels.
Different Types of Inventory
When planning your inventory management, you’ll need to consider the different types of inventory. Here are the main categories.
Raw Materials
Raw materials are the unprocessed components that form part of finished goods. A business must track and store these goods until they use them during production.
You should establish a tracking system to handle raw materials. You also need an efficient process for ordering and replenishing materials.
You should also assess the quality of incoming materials and maintain adequate inventory levels. Keeping accurate records of materials is essential for good inventory management.
Work-in-Process (WIP)
Work-in-progress materials refer to any unfinished work. That could include components or part-finished products.
These materials are a type of inventory because they represent the cost of goods used in the production process. You can use this to calculate the cost of goods sold.
Tracking work-in-progress materials helps you to manage and account for them accurately.
You can do this by regularly assessing the number of materials available, tracking the progress of production, and maintaining records of the costs associated with the materials.
Finished Goods
A business’s finished goods include any item ready to use or sell. As part of inventory management, you must track, store and check finished goods for quality assurance.
Properly managing finished goods is essential. They ensure customer satisfaction, timely delivery, and cost control.
You should put an inventory management system in place. It tracks when a warehouse receives, stores, and ships finished goods.
Use quality assurance checks to ensure the product meets customer expectations.
Keeping finished good inventory organized will help in all parts of your business. You’ll have satisfied customers, higher profit margins, and lower costs.
MRO Supplies
MRO supplies stand for maintenance, repair, and operations. It’s used in various industries to manage equipment and machinery. That is something to include in your inventory.
That’s because they are tangible items; you must keep them in good working order. So tracking them is the best way to do that. That includes their condition and stock levels.
Plus, it will help you estimate the costs of your maintenance and operational parts.
Cycle Counts
If you’re managing inventory, you need to understand cycle counts. That is a physical count of your inventory. It’s used to check that you’re maintaining accurate records.
It’s an opportunity to check inventory levels and spot any discrepancies. Doing this regularly will keep your records accurate and up to date.
When running cycle counts, make them part of your inventory processes. Schedule them, and put someone in charge of making sure they happen. It’s a vital inventory management component; you shouldn’t skip it.
Using an Inventory Management System
An inventory management system is a software you use to track your inventory. It will help you keep count, spot problems, and reduce losses.
When used effectively, it helps businesses to track their products and materials. It covers the entire product lifecycle from ordering, receiving, and selling.
When choosing an inventory management system, pick one that’s easy to use, accurate, and cost-effective. If your business is growing, invest in a scalable system.
And before you set up the software, determine what types of inventory you want to track. When you have it in place, make sure you set up reports so you can track trends. This will help you improve your inventory processes over time.
Managing Inventory for Your Business
Inventory is essential for businesses of all sizes and industries. It’s important to understand the different types of inventory to check you’re tracking everything you should.
It will help you keep on top of things, improve supply chains and boost your profit margins. With a clear understanding of the different types of inventory, you can better plan, execute, and monitor your inventory needs.
Continue learning about other ways you can improve your company processes by heading to our business section now.