Why inventory control in manufacturing is so important

If you are the owner of a manufacturing company it is critical that you have a tight rein on your inventory. Lack of inventory control is not only a form of waste but allows the cash reserves that are necessary to run the manufacturing business to sit idly by doing nothing. It is crucial that this form of waste is eliminated wherever possible. Successful manufacturing companies are built on the fact that waste threatens the productivity of the production process and drives up the costs so it must be avoided wherever possible. This is why inventory control in manufacturing is so important-

However, the good news is that by having a plan you can successfully have the right level of inventory control. By taking certain steps you can manage your inventory so that you are maximizing your inventory investment and not jeopardizing other aspects of the production process. The first step is to know how much your inventory costs. If you don't know how much money is tied up in your inventory then it becomes impossible to know if you are managing it well. Remember, that you should not only figure in the cost of the raw materials and the production costs but any other costs that are associated, as well. These can include costs such as: warehousing, transportation, and shipping to the customer. You must also figure in any associated costs of purchasing, as well. When you have the total cost of your inventory you can then see if you ordering too much inventory, too little inventory, or just ordering to often. The key to successful inventory control is knowing the right amount of inventory to have on hand to keep the production process rolling and not slow down sales.

The next step in effective inventory control is to know what is selling. Keep in mind that sales figure will go far beyond just what is selling right now. Sales figures will be influenced by a number of different factors including but not limited to: changes in the buying habits of your customers, any seasonal trend that is affecting ordering, and what the current economic conditions are. Once you take all of these figures into account it will help you determine what you will be selling and what your reorder point needs to be. Remember, that it is important when you figure in a reorder point that you also include delivery time.

Savvy manufacturing business owners also keep in mind that they may not need the same amount of inventory from month to month. Inventory control is a dynamic process and it is important to keep a watch on what is happening in your business to help you determine how much inventory you need to be ordering. Many manufacturing companies have an inventory checklist that helps to guide them in the processes that they use in controlling their inventory. However, business experts recommend that you use both an established process and a keen eye to help you determine the right level of inventory for your manufacturing business.

Finally, a crucial step in inventory control in the manufacturing setting is to have a plan. You always want to have a level of reserve inventory. This is known in the industry as safety stock. This is the amount of inventory that you should always have on hand that will keep the production line moving until new inventory arrives. Keep in mind that special orders, breakdowns on the production line, and many other factors can affect your amount of safety stock. However, if you have an inventory control plan you will always have the right amount of safety stock to keep your production line up and running.