All about inventory control in manufacturing
Many manufacturing business owners are unaware of the impact that their inventory has on their bottom line. If you fail to correctly manage your inventory you are creating waste within your business that can cost you a lot of money. This waste not only causes problems on the production line but the cost will have to be absorbed by your company and your customers. Proper inventory control is also essential to keep your customers happy. Your customers won't be thrilled if you don't have what they want, when they want it. The other side of the problem (having too much inventory), means having valuable cash reserves tied up in inventory that is sitting inside your company. The bottom line is that learning everything you can about inventory control is essential to making your manufacturing business successful.
Inventory control is not just about having to much inventory but have the right level of inventory. It is crucial for long term success that you learn everything you can about how to order and maintain your inventory while being sensitive to changing customer's demands. Here is all about inventory control in manufacturing-
- Know the cost of your inventory-You need to be very aware of what the exact cost of your inventory is. You don't want to be holding on to a type of inventory without knowing how much this is costing you. In addition, you should never order new inventory without knowing how much it will cost you. You will need to make sure that your cash flow is not being negatively affected by your inventory ordering practices. When you know the true cost of your inventory it will keep you from spending too much on it. It is also important to know how much it will cost your business if your inventory is short. Inventory shortage can be an even more serious problem for a manufacturer since everything comes to a stop when this happens. You need to be aware of having an inventory balance that isn't costing you too much but is enough to keep your customers happy.
- Know what is selling-You should always be aware of what is and isn't selling when it comes to your inventory. You need to have a system in place that keeps track of sales and notes any changes in your customers buying habits, seasonal trends, or general changes in the economy. Once you know how much you are selling then you can figure out a reorder point. This is the point that you will need be reordering stock. Remember, that you need to figure out a reorder point that will allow time for delivery without jeopardizing your stock level on the production line. The amount of inventory that you have in your company when you reorder is known as safety stock. This safety stock will allow you to stay in production until your new inventory arrives.
- Know that things can change-It is a serious mistake to assume that your inventory needs will remain the same from month to month. You should not let the demands of running your manufacturing business keep you from having a close eye on your inventory levels. If you are aware of what is happening in terms of inventory and the production process you will be able to make changes much more quickly and effectively if you need to. Remember, that even a small inventory control mistake could end up costing you a lot of money. It can be helpful to have inventory checklists in place that will allow you to not only monitor the right aspects of your inventory but help you in the reordering process.