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The Basics of Implementing Effective Inventory Management

All activities require effective inventory management. It can have a different definition depending on the industry, but whether a company is providing a retail store or producing shipping peanuts, certain essential procedures assure success.

Without knowing what is in stock and where to get it, no procedure can perform properly. The foundation for effective inventory management is a culture of understanding and accountability.

Inventory Accuracy Begins at the Receiving Station

The receiving dock is the most crucial stage of good inventory management. Receiving errors flow through the building, causing additional issues along the way. Strong managers, like any other part of inventory control, pay close attention to the three pillars of fulfillment control: people, system, and process.

Your receivers need to be well-trained. They must be aware of the requirements for accuracy and record keeping.

Take Advantage of Technology

Engineering limitations on mistakes are provided through data automation. The use of RF scanning and RF ID technologies helps to reduce errors caused by human record keeping. By implementing ASN data into your receiving system, your company can gain a lot of efficiency and accuracy.

Advance Ship Notices 

ASN is the abbreviation for Advance Ship Notices. This is where sellers provide data on the contents of an incoming cargo electronically.

This decreases the likelihood of obtaining the incorrect purchase order or the incorrect items. Finally, you must have procedures in place for receiving, cycle counting, auditing, and problem addressing in the event of an exception. Inventory management that is effective must be measurable.

Define Your Expectations

Because labor and inventory account for such a large portion of overall costs, firms must establish ahead of time what level of precision is required for success. Beyond 90 percent inventory accuracy, there may not be a return on investment in some circumstances.

In some cases, anything less than 100% could result in a significant process failure. Once those expectations are set, you must inspect what you expect, as the old adage goes. Good inventory management, like many other business processes, begins with effective front-line leadership.

The fundamental support structures for good inventory management include accurate receiving, adequate technology, and proper standards enforced through cycle counts and auditing. Your company will have the visibility it needs to improve productivity and profitability once these are in place.

Your business is vulnerable to a wide range of potential process failures if you don't pay attention, from unhappy customers to stalled manufacturing lines.

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