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Inventory Management Buffers Timing and Movement 

Almost any business has some form of inventory that someone has to manage or keep track of. Whether it be products that need to be sold, supplies for the office, or goods that will be used in a service related job. If these items are not kept track of, money can go down the drain pretty fast. 

Inventory costs any company money. If a company lets their inventory get out of control it can result in serious financial loss but if the inventory gets too low the business isn't making their potential profit. In order for this not to happen, companies need to set up an inventory management system. Basically it is a system that monitors the flow of inventory including, ordering, price comparison, space management, shipping, receiving, and controlling the products. 

In a good inventory management system, there is a balance between the inventory that comes in and goes out. There are several key elements to balancing this type of system: time, calculating buffer stock, movement of products, and accurate record keeping. 

Inventory Lead Times

Let’s start with time because you need to know how long it takes to process orders and how long deliveries and shipments will take based on the individual suppliers. For example, if you have always ordered toilet paper for the office from Company A but found out that Company B has a better deal, but the TP is gone and Company B takes 2 weeks to process and ship, you are going to have some mighty unhappy employees. Knowing about time management gives you the ability to know when you need to place an order and how much of an order so that you don't run out before you need that product. 

Inventory Buffer Stock

Buffer stock is next. Buffer stock are any additional units over the needed amount that need to be kept on hand in order for a steady level of production. For instance, most offices use some sort of copy machine that requires toner. Most keep an extra toner cartridge on stock for that just in case emergency because without any toner, the office can't print or run copies. Businesses have to have a buffer so that in case of a crisis they can still operate. 

Inventory Turnover

The movement of stock is crucial to inventory management. Any unit ends up going through many processes while in inventory. In order for the unit to be beneficial it must move at a certain rate. Under inventory management, the unit must be tracked and time needs to be taken to look at and adjust the amount of units depending on the current inventory. It would be detrimental to wait until your inventory is too low before waiting to order more. 

Inventory Record Keeping

This last element is one of the most important parts of a successful inventory management system and that is keeping accurate records. If you don't know how much you have on hand than you can't know if you need to order more or less. If your company deals with sales reps, they must know if the product is on hand or if it will have to be ordered when they meet with potential clients or they risk losing a sale. All businesses should have a record of all completed goods balanced against their inventory totals. They also need to keep track of what gets shipped to clients. If a product is returned, it needs to be logged back into the system and checked whether it can be sold again or not. Above all, record keeping is crucial for tax purposes. No one wants to IRS breathing down their necks without documentation. 

If all of these elements are put into play, a good inventory management system will keep a company running smoothly as far as their inventory goes. Don't get caught off guard by not monitoring your inventory. 

By: Philip Lebrie 

TEKOA ERP Software 

Web Portal Software

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