What is Inventory Management ? Objective, Types & Importance

To make your business successful, effective use of inventory management is important. Because of inventory management software, you can easily manage the process of ordering, storing and optimizing your products in a single place. In this blog, you are able to learn about inventory management, its object, types & importance in an e-Commerce business.

What is Inventory Management?

Inventory management refers to ordering, storing, and selling goods. It involves the management of raw materials, warehouse management, Finished products & processing of goods. The inventory management techniques are influenced by the size and the product of the Company. It tries to pare down the inventories in such a way that they reduce the surplus or shortage of goods.

What Is the Objective of Inventory Management?

The objective of inventory management is functional and budgetary. In Functional metrics, stocks & raw materials should be available in sufficient amounts, or in budgetary metrics, the business should be done at the lowest possible amount.

Some of the important objectives are mentioned below:

1.   The very first objective of Inventory management is to ensure the proper supply of material and stock to avoid last minute rush when customers ordered something.

2.  To ensure the material quantity in a sufficient amount so that the goods will be available on time.

3.  To manage returns. Almost every business has a return facility nowadays. Maintaining return order keeps your business ahead of your competitor. You must have a sufficient amount of products to fulfill returns. As an inventory manager, you must take care that the products should not be overstock or out of stock and fulfill customer details on time.

4.  To manage orders from multiple ecommerce channels. Keeping an eye on each and every order on different platforms is a slightly difficult challenge for every business. The objective of Inventory management is to manage business on multiple channels so that you can satisfy your users. It is a centralized system that helps to easily monitor inventory for both online or offline business. It tracks order, sales or real time inventory for smooth working of your business.

5.  Another objective is to prevent your business from product losses. It saves your product from being overstock. If you have access to more products than sufficient amounts, then the chances of damages increases. Which is the waste of capital as well as products. To avoid such losses inventory management is important.

Types of Inventory Management

Types of inventory management system are as follows:

1.  Raw substance inventory

The most basic commodity to manage in a business is raw materials. It is used to make a finished product, so it must be kept in sufficient supply to avoid product shortages. It is the primary component of the inventory that must be managed first.

2. Under Process

Some products are those who are in the manufacturing process. These elements/components are in the process to become a finished product. For their security, an inventory system is a must.

3. Finished Goods 

After facing the manufacturing process, the final item is ready to sell. An inventory is required to store the final product so that it becomes safe before final delivery.

4. MRO Products

Maintenance, Repair and Operating goods are those which are not for selling. These products are utilized by the company itself like computers, paper, pen etc. There should be a management system for them also so that it is feasible for them to work on their product. If they are in lack of resources then the manufacturing unit also lag behind and the downfall starts.

5. Packaging

There must be an inventory required to store the packaging material. The material may be for storing in for your own or for delivery to the customers. It requires safe management, as if your packaging is good then there is less chances of damage.

6. Cycle Inventory

There is a product or material which a company requires on a regular basis to fulfill their basic requirements like stationary in an office. The office requires stationary so that they can write down important things. Their must be a dedicated space for that.

Importance of Inventory Management in Ecommerce

Inventory management in ecommerce is vital as it processes the right product at the right time in the right condition. The management software displays real time stock available. It helps the e-commerce retailers to grow in every aspect of ecommerce. It ensures the long term growth in the market.

1.  Capital management

Inventory planning & control allows them to save their capital. This is the first & foremost importance of inventory management .It provides the real time data of how much stock they have and how much they required. This allows them to save the money rather than spreading without need. It frees them from reinvesting in stock.

2.  Product Analysis

Another importance of inventory management is that it provides insights about the most selling product in the market. This allows them to manage the product manufacture of that product. These small-small data help them to grow their business services.

3.  Customer Satisfaction

The proper inventory tracking technique gives you an absolute view of your in hand stock which yields to customer satisfaction. People rarely return products that have recently been delivered or are out of stock.. Henceforth the proper inventory is must to bind the customers and timely deliveries will satisfy them.

4. Order Fulfillment

An accurate inventory control system helps you to easily track the order and their available stock in your warehouse. It helps you to deliver the right product at the right place. It builds customer’s trust in your brand and increases sales.

Conclusion

Inventory management is vital for not only ecommerce but for every business. It paved the way for success. To run smooth business management is necessary. Ecommerce business is running smoothly on the basis of inventory control for such services Pinnacle is here to help you.