Inventory Control in Manufacturing
One of the biggest threats to any business is waste. This is especially true in the manufacturing business.Waste creates large problems for the production process, and it results in higher costs to both customer and the manufacturer. It also takes more time and energy, and it tends to be hard on the environment. Coupled with the problem of waste for many manufacturers is inventory control. Problems with inventory can be fatal for a business, and especially a manufacturer. Inventory control becomes a huge issue when you don't have the right item for your customer when they come to claim it. Ultimately, if this continues to happen you start to loose customers in this situation. Also, if you were to order far too many of a particular item, than you normally sell you would invariably a large amount of money. Having either too much or too little, when it comes to inventory could completely destroy your business. The key to success for any manufacturing business is to exercise some inventory control. Businesses need to learn how to order and maintain their inventories, so that they are adequate to the business's needs, but never too large. Inventories also need to change with changing demands. If a product becomes suddenly more popular than others, your business needs to order more, and know how many to order.
If you have a manufacturing business, and want to have better inventory control, there are basic steps to follow. Here are just a few of the factors that can affect your inventory control in manufacturing-
- Think about the cost-It is crucial to understand the cost of holding a particular stock. This should be based on both the cost of producing the item as well as any other costs that are associated with the stock (such as warehousing, transporting etc.) Another very important factor is the cost of placing an order for new materials. Purchasing needs to be a controlled function within your company.With a careful inventory, you will have a much better idea, of what needs to be included in each order. This will keep you from over or under ordering, and from simply ordering too often. In addition you will need to take into account how much it will cost your business when stock is short. For a manufacturer this is obviously a bit issue, because business basically stops. Keep in mind you're your customers will be heavily impacted, by the lack of inventory.
- Know what is selling-You will need to pay close attention, to the items that sell the most. You should keep careful records of the total number sold, and the changes in buying habits, according to things like season of the year, or general economic expectations. Once you have generally figured out the number of items you will sell, you can then figure out a reorder point. The reorder point is the point at which a new set of stock needs to be reordered. Remember that you will need to figure out the reorder point based on the amount of time, for delivery.
- Remember that inventory is not static-You should never just assume that you need the same level of inventory every month. Be sure to carefully watch what is going on in your business and order accordingly. Think carefully about orders before you place them. It can be a good idea to make an inventory checklist, in order to keep all necessary items in mind when ordering.
- Have a plan-You will need to make sure that you have adequate safety stock, between the time of an order, and the time when the items arrive. You will also need to be aware of any special orders that will deplete stock considerably. Having an ongoing inventory control plan will help you to maximize the profitability of your manufacturing business.