The main objective of the inventory management will be about knowing where your inventories are stored and what is their present quantity. There are various ways many companies track their inventory.
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Following are few useful techniques employed in order to be efficient in inventory management control.
- Economic order quantity
While ordering for the item, it is important to order the fast-moving item at sufficient quantity, so that you can get best quantity discount in order to minimize your production cost.
- Minimum order quantity
Minimum order quantity is the smallest number of the set stock, that a supplier is ready to sell. If your demand for certain item is very low then you can check with the supplier about their MOQ.
- ABC analysis
You must categorise all your items to be stored in the warehouse on the basis of their cost. Category A must be the list of items which are very costly and Category C must be least expensive items. The balance items can be put under B category.
- Just-in-time inventory management
This is known as JIT, where based on the need of the production, the raw material will be purchased and kept in the warehouse. This way, you can reduce the inventory cost.
- Safety stock inventory
In this technique, an extra inventory is ordered beyond the expected demand to prevent stockout situation typically due to wrong forecasting or any unforeseen changes in the customer demand.
- FIFO and LIFO
FIFO stands for first in and first out, while LIFO stands for last in and first out. The items can be categorised based on their consumption pattern in order to do proper inventory management.
- Reorder point formula
This is a technique where the store in-charge can decide at what point he should reorder for the item, based on their consumption pattern, so that stock out position do not occur and production may not suffer.
- Demand forecasting
This is a technique where based on the past history about the consumption pattern, one can decide in advance what will be the demand of certain item so that the same can be stocked.
- Drop shipping
In this technique, store do not prefer to stock these items but they pick it from certain different party and directly ship it to the actual consumer.