If your new business involves manufacturing, distribution, or both, you're going to be managing the movement of things. As those movements become increasingly frequent and complex, you'll need tracking systems that can scale up and provide the whereabouts of a widget at a moment's notice. Your inventory management information system is your window into - and beyond - the warehouse. It needs to be smart enough to keep supplies proportional to demand, assist shipping agents with moving product seamlessly out the door, and even to speak to your accounting software as it automatically places and receives re-stocking orders. This third piece in our business essentials series suggests questions you might ponder when assembling business software that will connect you to the most volatile aspect of your business.
- What critical information do you need to collect about your inventory items?
Sure...you can collect and record every conceivable aspect about the items you make and/or distribute. Storage space is rarely a concern these days. But how much labor is going to be involved in gathering all that data, and what are you going to do with all of it anyway? Focus on those elements that are going to make a practical difference in your operations and that will be needed for generating intelligent, business-critical reports. The properties that you assemble about your inventory will drive functionality in other areas of the system such as:
- valuing your inventory
- grouping products by category for cost and sales reports
- cross-referencing customers and vendors by product
- assessing lead-times
- organizing the warehouse in the most logical way for efficient access
- What processes and tools will you use to maintain accuracy in your inventory counts?
Inaccurate inventory counts that lead to unexpected shortages can mean severe delays in the manufacturing and sales processes. Too many of those occurrences and you'll start losing disappointed customers permanently. On the flip-side, counting errors that lead to surpluses mean that you'll unintentionally be stashing cash on your warehouse shelves for an indefinite amount of time. When nobody needs that product anymore, you'll still have plenty of it lying around. You want to know the true value of your inventory assets for accounting purposes, and that requires precise counting methods and tracking instruments. Begin by anticipating the volume and turnover of your inventory items. Then determine counting techniques and acquire inventory accuracy tools that are scaled appropriately for your particular need.
- How will you manage inventory stocking levels?
Precise counting is just one part of keeping your inventory lean. The other piece of the puzzle is timing. Determining how and, more critically, when to resupply your warehouse will maintain optimum inventory levels and prevent shortages/excess. Especially in environments with rapidly turning inventory cycles, your tracking system should be able to capture minimum/maximum quantities, reorder points, and safety-stock levels for your items. This data should be accessible for comparison against actual quantities or, better yet, communicated seamlessly to your purchasing system for automatic replenishment of items before their levels become critically low.
- How will your inventory be arranged in the warehouse?
The people who work in your warehouse aren't rats in an experiment. So they don't need the facility in which they work to be a constantly shifting maze full of elusive and arbitrarily-arranged targets. Logical planning about where material will be stored and how it will be arranged allows for efficient picking, pulling, stocking, and counting of items. A critical part of this process is maintaining all of that information in your inventory management information system; like a map with specific directions to any given destination. With consistent planning and tracking, your warehouse employees will be able to navigate their surroundings with ease, and they'll thank you for not giving them the runaround.
- How do your inventory tracking tools work together?
Effective inventory management often requires the coordinated use of multiple software systems, each providing a unique function towards fulfilling all the above needs. Like instruments in an orchestra, you want them all playing from the same sheet of music. If even one is playing a solo, the smooth music of your inventory movements will suffer. Identify your priorities with regard to inventory management, and let software that serves those needs be the core of your system. As you add other pieces, make sure that they interact effortlessly with those central components.