Basics of Inventory Management

The best tool for "Optimal Inventory Management"
Consider an inventory management system that tracks inventory movement across all the sales channels in real time
Many small businesses will try to manage their inventory through excel spreadsheet and formulas.
Once the business starts to grow, relying on Excel spreadsheets for inventory management becomes extremely limited.
An inventory management system that updates the inventory movements across all channels will significantly reduce the risk of overselling or under selling or shortages which is the objective of Inventory Management.
Determining the "Right Price" for the Inventory
We don't want to pay more for the inventory than we have to, but lower prices aren't always better.
Suppliers often promise price quantity breaks - we can order more inventory to save in the price, but we have to calculate a trade-Off between saving and risks of extra inventory.
There's also whole host of carrying costs attached to the inventory.
The more stock on the hand, the more have to spend on storage facilities, while increasing risk of having products going out-of-date.
This is where the Economic Order Quantity (EOQ) formula comes in.
Economic Order Quantity is a formula that calculates the number of units the business should be adding to inventory order.
This equation is aimed at reducing the total costs of inventory management – including factors like order costs, holding costs, and shortage costs.

Calculating the "right amount" of Inventory to stock
The Reorder Inventory Point is based on Sales Forecast information from previous months and years.
For this you want to make sure you've got the right Inventory data.
We should look for a solution that'll automatically track our inventory movements as much as possible.

Calculating the "right amount" of Inventory to stock
Having the right amount of inventory is crucial.
If the inventory too little, the customers might start looking elsewhere.
If the inventory too much, there's a chance we'll be stuck with lots of extra stock that you'll be forced to sell at clearance prices, or risk having them become obsolete.
Inventory Management
The definition of Inventory Management is easy to understand.
Simply put, inventory management is all about having
the right kind of inventory
at the right quantity,
in the right place,
at the right time, and
at the right cost.
But how do you implement the best inventory management techniques to ensure the best results
Economic Order Quantity (EOQ)Equation
Knowing the "Right Reorder Point" for new Inventory
Knowing your EOQ lets us know the inventory level we want to maintain, but how do we decide when it's time to place a new order?
We want our shipment to arrive just in time (JIT)… ideally when our previous batch is about to sell out.
If it arrives too early, we'll be looking for space to store these items, and if it arrives too late, then we're out of stock, may lose the customers or sales.
So, we always want to make sure we've got the inventory on hand, which is where our reorder point comes into play.
When it comes to calculating our reorder point, you need to account for:
The time it takes to get your items picked
The time it takes to get your items packed
The time it takes to get your items to be shipped (lead time)

Re-Ordering Point
Safety Stock
Safety stock is the emergency stock we need to endure unexpected occurrences - like seasonal acts of nature like blizzards and typhoons.
Through Safety Stock Formula we cover the difference between extreme situations and the everyday - which should be enough to keep us safe.
Safety Stock Formula
Figuring out the "Right Place" to Sell & Distribute the Inventory
If we sell on multiple channels, then we've to make sure the the right amount of products in the right place which is probably a challenge we face constantly.
The great thing about selling products online ( only one channel)is that we're fulfilling all orders from the same pool of inventory. So, we don't have to think too much about how many items we want to allocate to individual sales channels.

The best tool for "Optimal Inventory Management"
The best practice is track inventory movement constantly, instead of doing it periodically.
Automation is one of the biggest advantages of making the move to inventory management software - we won't have to worry about missing reorder points or overselling by accident.
By automating the inventory management process as much as possible, we'll be able to reduce the likelihood of human error.
After automation, still we need constant monitoring of the system and making changes accordingly.
Inventory Management
Inventory management is the management of inventory and stock.
It is an essential element of supply chain management
Inventory Management includes aspects such as:-
Controlling and Overseeing Ordering Inventory,
Storage of inventory
Controlling the amount of product for sale.
Basics of Inventory Management
By:- Israr K. Raja, Islamabad, Pakistan
Visiting Faculty:-
*International Islamic University,
*Quaid-i-Azam University,
*Preston University,

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