The Nuances of Inventory Management


It seems straightforward: You count the items you have in stock, you write it down, and you know how much stuff you have available to sell. However, inventory management is so much more complicated than that. In fact, inventory management is so much more than the items you sell; it is also your equipment, your raw materials, and even your customers and sales. Much of what inventory systems track you can’t simply count in a spreadsheet with any efficiency.

When your business is small and fragile, it is especially important you have an accurate account of your inventory, assets, and orders. This guide should help you understand the nuances of different types of inventory management, so you can do it right from the start.

Inventory Management

Simply put, inventory management is having the right stock at the right time and place – but there is hardly anything simple about how to accomplish this feat or how your business can benefit from proper execution. In truth, inventory management is one of the most complex responsibilities of supply chain management, an already convoluted field. Still, inventory management is undoubtedly worth the effort; an effective inventory management system keeps customers happy, costs low, and goods in sellable condition.

There are several methods for tracking your inventory, from manual counts and spreadsheets to high-tech tags and automated scanners. Generally, the smaller, cheaper methods are appropriate for startups that don’t have much inventory to manage, but as your business grows, you must be able to scale your system. If you don’t have the wherewithal to grapple with complicated calculations for economic order quantity, reorder points, and safety stock amounts, you should get comfortable with inventory management software.

Asset Management

You probably consider inventory to be those items you intend to sell, but in truth, inventory is an umbrella term covering nearly anything that adds value to your company. Thus, an important and often overlooked aspect of inventory management is asset inventory management. Following the pattern of inventory management’s definition, asset management can be defined as having the right durable goods at the right time and place, and like inventory management, it isn’t usually simple.

The key difference between inventory and asset management is this: Inventory consists of what you sell, and assets consist of what you own. Typically, asset management is focused on IT equipment, such as computers, servers, and software, but they also include machines, vehicles, furniture, and even important documents. The key to effective asset inventory management is asset tracking, which requires each item to have a unique identifier. Typically, this is a serial number or barcode, but more and more businesses are equipping themselves with near-field communication devices and adding radio frequency identification tags to their assets. This higher-tech asset tracking technique makes management nearly automatic, reducing costs in the long-term and improving efficiency dramatically.

There is obvious value in tracking your assets. For one, it reduces additional costs of repurchasing new equipment and tools; for another, it ensures quality of service and goods sold. Undoubtedly, the complexity of your asset tracking will increase over time, but it is vital to have at least some method of managing your assets from the beginning.

Order Management

Order management is having the right balance of incoming and outgoing inventory at the right time and place. Just some of the responsibilities of order management systems include:

  • Managing customer data, including purchase history and payment history
  • Verifying sufficient inventory to fill orders
  • Managing vendors, and comparing vendors for optimal quality and price
  • Making shipments, especially for online businesses

Essentially order management concerns everything to do with taking and filling orders. Before you start investing in order management tools, you should investigate your own order process, which is often called order to cash, or O2C. Likely, you will discover that after your customer makes a payment, the order travels through several departments – including sales, customer service, accounting, warehouse, and shipping, if not more – before it is fulfilled. Effective order management systems must be able to communicate with all these groups, retain important information, and execute the order in a timely manner. As a bonus, your order management software should integrate with your inventory and asset inventory systems to provide a comprehensive look at your inventory whenever you need it.


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