SAP Business One is advanced software that allows businesses to manage inventory effectively for optimum success. Managing inventory is the process of arranging and tracking goods within a business. The practice optimizes your company’s supply chain and other processes, such as managing product sales, managing stocks, controlling purchases from suppliers, and fulfilling orders. An inventory management system helps companies optimize their supply chains, and SAP Business One makes it easy to automate such processes.
Business inventory refers to the commodities that a company holds and intends to sell. A company accumulates stock of materials delivered to it by a supplier to sell them to customers at a future date. To maintain its value in the market, an organization must manage, monitor, and conserve the stock in the best way possible. Here are a few facts you need to know about inventory management.
Let us begin,
Defining Inventory Management
Inventory management refers to the process of determining when to reorder stock, how to store it, and tracking it in and out of warehouses. A company’s inventory management system, or stock management, oversees the conversion of inventories into revenue. Retailers, for example, have stock in hand that they manage so they can sell it in the future.
Inventory management systems or applications are critical for companies to manage even the most basic operations, such as maintaining the appropriate level of products to serve their customers efficiently. Your company’s inventory management strategy can vary depending on the types of goods or services it sells.
Inventory management is a critical process in the supply chain that companies should monitor to scale their businesses. When an organization has more inventory available for customers to use, it generates more long-term profits. Companies can easily track inventory databases using SAP Business One and make informed purchasing decisions.
Inventory Management Methods
The way you utilize inventory management in your warehouse determines the success of your business. There are many methods organizations use to manage inventory. You can consider the following:
1. The economic order quantity
The economic order quantity is a formula that aims at minimizing related order costs. Based on the total production costs and demand rates, the model determines the ideal order quantity the company needs to place. By selecting the highest number of products to order, it minimizes small purchases. Use SAP Business One to integrate formulas into your business to ensure stability and performance.
2. Minimum quantity of each order
The minimum order quantity (MOQ) is the smallest amount of stock that a supplier will sell at a particular time. Suppliers will not sell to customers if retailers do not buy the minimum order quantity. SAP Business One can help you get suitable suppliers with the MOQ your company needs.
3. The ABC analysis
The method helps in analyzing the inventory that is earning the organization profits. It further breaks down subject matter into items whose total cost impacts the stock considerably.
4. Safety stock inventories
The technique involves ordering extra inventory beyond the expected demand. It aims at preventing stockouts caused by inaccurate forecasting or unexpected change in consumer demands.
5. Just In Time Inventory (JIT)
It enables raw materials orders from suppliers to link to product schedules. It involves holding as little stock as possible to avoid risks associated with handling large amounts of stock.
6. Batch Tracking
It allows for quality control by grouping stocks with similar traits and monitoring them. A complete inventory overview is then available, with information such as traceability of defective items, expiration dates, etc.
It involves delivering the products to a third party such that the customer will never see our touch on the product. Businesses use the method to outsource several aspects of stock management.
8. FIFO and LIFO
In inventory management, two methods determine the cost. FIFO (first-in, first-out) uses the assumption that the older stock gets sold first. It is an excellent way of keeping inventory fresh. LIFO ( last in, first out) assumes that the newer items sell first. The method helps to prolong the shelf life of perishable goods.
How to choose inventory management systems
Companies must do a lot of research to determine the appropriate method of inventory management. Once you identify the features of your business requirements, you can select the correct inventory management system. You can use SAP Business One to automated finding and matching your business with the most viable inventory management method.
Inventory Management Benefits
Inventory management has a lot of benefits that companies enjoy. They may be as a result of the type of inventory management system in your company. Using SAP Business One can help your organization reap more benefits within a short period. Some of the benefits include:
1. Saves the Business Money
A great inventory management system allows you to sell your products at a profit and manage your finances more effectively. The sale of inventory enables companies to save money usually spent on inventory storage and management. Furthermore, it eliminates the risk of having too many products on hand that could cause losses.
2. Leads to Customer Satisfaction
An effective inventory management system will enable your company to trace the amount of stock required for delivery. Integrating inventory management processes and automating most operations with software like SAP Business One means maximizing customer satisfaction.
3. Helps to Save Time
SAP Business One ensures accurate record-keeping, which allows quick decision-making processes. Also, it integrates other company processes to enable employees to handle other important aspects of the company.
4. Keeping Warehouses Organized
An effective inventory management system can help streamline processes by organizing warehouses strategically. It is critical to arrange the warehouse well so that the supply chain moves efficiently. It ensures quick order fulfillments, hence high returns for your business.
5. Improving Cash Flow
It allows the organization to move funds smoothly by eliminating the need to spend large amounts of budget all at once. An improved cash flow allows the company to handle other processes such as product development, payroll, etc.
6. Maintaining High Inventory Levels
SAP Business One is an ideal inventory management solution that can help your business maintain high inventory levels. Having high inventory levels helps businesses meet their customers’ needs by ensuring timely delivery of their products. It also strikes a balance between the input and output levels of products.
SAP Business One seamlessly manages inventory management to ensure high returns in your business. You can also integrate other systems with the software to optimize processes in inventory management. Call us now to integrate SAP Business One into your company for inventory management functions.