In order to run a manufacturing or wholesale distribution company efficiently, implementing a stringent inventory control system is a critical element. Determining which inventory management techniques are the most beneficial for your business, however, can be a lengthy process of trial and error. Here are a few tips to help you save time and start running your business as successfully as possible as soon as possible:
- Set up various stock levels and parameters, including maximum level, minimum level, re-order level, average level, and danger “level” of product. This allows you to know what you have on hand, what needs to be ordered, how much needs to be ordered, and when it will need to be ordered to satisfy demand from sales orders or production orders.
- Maintain a Perpetual (or Automatic) Inventory System, which provides details about the quantity and value of stock of each item at all times without undergoing the tedious process of physical counts.
- Calculate the inventory turnover ratio, which will determine slow and fast moving inventories, dormant inventories, and obsolete inventories. Analyzing this information will help manufacturing and wholesale distributors schedule future purchases based on consumer consumption and seasonal fluctuations.
- Challenge MOQs (minimum order quantities) and price quantity breaks because they can create surplus inventory. Some suppliers require MOQs or quantity price breaks to make up for their costs of establishing a job. Work with your supplier to reduce set-up costs or propose an annual commitment agreement so he can still build the MOQ, but agrees to hold the inventory and ship it to you in small quantities.
Varying degrees of these, as well as other, inventory management techniques only work when successfully implemented and consistently observed, though. So ensure all levels of employees understand and comply with whatever inventory management techniques your company decides to apply.
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