Inventory management for manufacturing businesses
How well you manage the inventory of your manufacturing business will have a direct effect on whether or not your manufacturing business is successful for the long term. Your inventory control will determine not only how healthy your cash flow is but also how healthy your manufacturing business is overall. Many times manufacturing business owners fail to realize the importance of carefully managing their inventory. However, if you fail to manage your inventory it is the same as mismanaging your cash flow. Far too often manufacturing business owners are holding on to much inventory and simply cannot get the value back. However, if you learn the basics of managing inventory you can avoid this problem. Here is what you need to know about how inventory management for manufacturing businesses-
- It all starts with sales-You will need to base your inventory management on sales. A good place to start is to look at the sales that you have had in the recent past. You need to ask yourself-Did you have enough inventory on hand? Were you able to fulfill your orders promptly or did an inventory shortage delay your production process. When you have this information you will be able to begin to formulate how much inventory that you need to have on hand at all times. Finally, keep in mind that you will also need to figure in how much inventory you will need to keep your manufacturing business going while your new inventory is being delivered.
- Understand the real cost of inventory-The next factor that you need to take into consideration when it comes it inventory management is the real cost of your inventory. Keep in mind that this figure will go far beyond just the price of the inventory. You will need to figure in shipping, warehousing, and any other costs associated with ordering the inventory. In addition, you will need to take a look at your cash flow and determine if you can pay for large orders of inventory if you have a special order come up.
- Have an inventory management system-It is crucial that you have a system in place that will track your inventory. Today, there is a large variety of manufacturing software programs that can help to keep you in touch with exactly how much inventory that you have at all times. This inventory management software can also help you to set reorder points for your inventory that will help you know when the right time to reorder really is rather then just guessing and wasting money. You can also use your inventory control software to keep track of what is and what is not selling so you can begin to move inventory before it becomes completely obsolete.
- Know what is selling and what isn't-In order to effectively manage your inventory you will need to always know what is selling and what isn't. If you fail to stay on top of this issue with your inventory then you can quickly find yourself surrounded by inventory that you have paid for but isn't going to make you any money at all. Savvy manufacturing business owners take the time to know what is happening with the inventory at all times. This way if you find that certain kinds inventory are slowing down you can then take proactive steps to discount the inventory, bundle it with something else, or come up with some solution that allows you to get as much money as possible from it before it becomes dead inventory. When you are able to do this you will be effectively managing your inventory for the highest possible profitability.