What is Inventory: Types, Examples, Goals, Challenges, and How to Manage
Inventory is a form of asset that shows that a company has products to produce and sell. Inventory management is not arbitrary, because it will affect the number of sales.
Inventory also has various shapes and types, depending on the industry the company operates in. Therefore, get to know what inventory is and how to manage it in this article!
What is Inventory?
Inventory is the material or raw materials for making a product. Sometimes, according to Investopedia, inventory can also be the main product sold. Inventory must be recorded neatly and in detail in the company's books.
The correct inventory management process will help companies save operational and production costs. Below, we explain the goals, benefits, challenges, and how to manage company inventory.
Goals of Managing Inventory
Not only to ensure the company has materials for production, here are some of the purposes of managing inventory, summarized from Easyecom:
- Ensure that the quantity of goods is sufficient for production and sale.
- Avoid miscalculations.
- Maximize production duration.
- Optimize budgets and business plans.
- Ensure the accuracy of goods purchased by consumers.
Benefits of Managing Inventory
Once you know the purpose, you must also understand the benefits of managing inventory properly:
More efficient
During the process of managing inventory, you will definitely learn about prices and available stock of goods. By knowing this, you can calculate the stock available at several locations. That way, the company only needs to order goods once and spread the stock to several locations. This will help companies save on shipping and operational costs.
Improving the quality of cash flow
By cutting operational costs, the company's cash flow will certainly get better. Especially when sales continue to repeat and increase income and profits.
Consumers become satisfied and loyal
By having stock in several locations or warehouses, you can speed up the process of sending products to consumers. Of course, while maintaining the quality of the product or goods ordered. Customers will become more loyal.
Automate tasks in the warehouse
Inventory management can be done with the help of applications. This will automate many management processes. That way, workers can focus on other things and production runs more effectively.
Improve worker performance
With the automation process, workers have a more focused work scope. They will have more time to complete major obligations. In addition, productivity and production effectiveness will increase.
Challenges of Managing Inventory
Quoting NetSuite, here are some of the challenges in managing inventory:
- Ensure inventory figures are accurate.
- Without the help of automation, manual processes will take a long time.
- Changing consumer needs mean that inventory must be updated.
- Maximize the warehouse so that inventory is neatly organized and products continue to run.
Types and Examples of Inventory
Raw/raw materials
As the name suggests, the items in this type of inventory are the main materials for making a product. For example:
- flour and eggs for making bread
- coffee beans and coffee filters to make coffee
- rice, eggs, oil, onions, meat for stalls or restaurants
Items still in production
Usually there is a special inventory to ensure goods have not finished production. Later, the goods production process will continue to become new products. For example:
- Cake dough that is stored overnight to rise.
- Casings, engines and other components to make cellphones.
Finished goods/products ready to sell
This type of inventory consists of finished and ready-to-sell goods. So there is no need for a production process or to have gone through it. Example:
- tissue inventory
- milk inventory
- new HP inventory
- new motorbike inventory
Component
This type of inventory is also goods sold by the company. For example:
- Engines, bodies, seats, wheels, rims, exhausts, chains and lights for motorbike production.
Operational and maintenance/repair tools
This inventory is usually stored in the same warehouse as the production site. All tools that must be used or used by workers to carry out production, for example:
- various production machines
- gloves
- face mask
- hard hats
- cleaning tool
Packaging materials
As the name suggests, there is a special inventory for product packaging materials. For example:
- bubble wrap
- plastic wrapping
- wrapping paper
- packing box
Inventory for refill items
This inventory is usually needed in restaurants or hospitals, because it must be ready to be refilled when it runs out. For example:
- tissue
- dish soap
- toothpick
- hand sanitizer
- disposable mask and gloves
Extra inventory
This type of inventory is kept for goods that are difficult to find on the market or whose prices fluctuate. So per
Businesses will buy 2-3 products at once. For example:
- motorbike engine components
- chemicals
- special machinery
Transit inventory
The goods included in this inventory will not last long in the warehouse. Because these items are only staying overnight or are being stored temporarily to be moved again. Example:
- The workshop will order machine components directly from the factory, then these components will be entrusted to the factory's branch or shop so they can be picked up later.
Reserve inventory
The difference with extra inventory is that for this type of inventory the items stored are often sought after or run out quickly. So companies will buy them in larger quantities to continue to meet consumer needs when there is a shortage. For example:
- cat litter
- motorbike outer tire
- new rims
- motorbike glass
- motorbike seat
- packaging raw materials
Leftover/unsold inventory
As the name suggests, this inventory stores leftover and unsold items. Usually also items that are out of season. For example:
- seasonal clothing or special collaborations
- seasonal food or drink
- bath and beauty products that don't sell out
How to Manage Inventory
Monitoring the availability of goods
First, of course, you have to monitor the number of goods and stock in inventory. Make sure the quantity is sufficient for production. Make a dose per week or per month.
Using online or cloud-based inventory
Today inventory can be managed and monitored with the touch of a finger. You can work with an online inventory service provider and access it via computer or cellphone.
Calculation for replenishment inventory
If you work in the service industry, of course calculating refill inventory will be very helpful. Make weekly or even daily calculations to maintain stock.
Create a batch system
To support the refill or restock process, create batches where you will make purchases within a certain time period. You can also divide what items are purchased in each batch.
Use a barcode system
The barcode system will make it easier for you to calculate stock and availability of goods.
The ability to manage inventory can be developed by learning directly from experts.
You can take our short training program to learn about inventory management by clicking here now!
