All software cannot be like ProfitBooks, which offers powerful and 100% free inventory management and is also easy to use.

In this article, we discuss how inventory management works, and what free inventory management software you should use as a small business owner.

How Inventory Management Works

In simple words, inventory management refers to the process of ordering, storing, and using a company’s inventory. These include the management of raw materials, components, and finished products, as well as the warehousing and processing of such items.

A company’s inventory is one of its most valuable assets. Be it retail, manufacturing, food service, and other inventory-intensive sectors, a company’s inputs, and finished products are the core of its business.

A shortage of inventory when and where it’s needed can be extremely detrimental.

At the same time, inventory can be thought of as a liability. A large inventory carries the risk of spoilage, theft, damage, or shifts in demand.

Inventory must be insured, and if it is not sold in time it may have to be disposed of at clearance prices—or simply destroyed.  Read more on how surplus stock can be managed so that you don’t incur losses.

Anyway, for the above reasons, inventory management is important for businesses of any size. Knowing when to restock certain items, what amounts to purchase or produce, what price to pay—as well as when to sell and at what price—can easily become complex decisions.

Small businesses often keep track of stock manually and determine the reorder points and quantities using Excel formulas. This is often hectic and cumbersome.

Thankfully, technology has transformed inventory management systems for both online and offline retailers. Now retailers can sell more, grow faster, and run smarter.

Many businesses are now using free inventory management software to stay up in the game and scale their business.

Free Inventory management software makes accessing and updating a business’ stock possible from any location at any time using smartphones and tablets.

Many apps also include features like customer-facing product catalogs and processing sales; supplier and customer data management; order entry, editing, and tracking; as well as direct integrations with other physical and digital tools.

If you want to learn more, read our in-depth article on Inventory management.

Benefits of using software for inventory management

Simplified inventory management

The biggest benefit to using free inventory management software is that it makes the process of managing your inventory a whole lot easier, saving you time and money.

With supply and demand changing throughout the year and your stock levels continuously fluctuating, inventory management software helps to avoid the risk of human error by automating your key business processes.

Reduced risk of overselling

Overselling is a major challenge for online sellers, often resulting in loss of control, disappointed customers, and in some instances, being suspended from marketplaces such as Amazon and eBay.

That said, it is a selling challenge that is preventable by using the software. An inventory management software synchronizes your orders and inventory across each of your online marketplaces and eCommerce platforms.

This ensures that your stock levels are adjusted each time you make a sale.

Greater cost-savings

By streamlining your inventory management processes, you not only stand to eliminate the inventory costs associated with human error, but you can also benefit from further cost savings

Well to start with, it can improve your chances of shortening your supplier lead time through better supplier management relationships.

It also allows you to reduce excess and obsolete stock, not to mention the subsequent costs incurred, by establishing your par levels and calculating your safety stock.

Perhaps the biggest cost saving comes from automation. Poor inventory management can cause significant revenue losses, driven by avoidable errors including stock-outs and overstocks.

Want to know more effective ways to save yourself from losses? Check out our article on various inventory management techniques that you can use to cut losses.

Avoidance of stock-outs and excess stock

When it comes to managing your inventory, trying to maintain the right balance is a challenging task. After all, too little stock can lead to a stock-out, unhappy customers, and potential loss of sales.

On the other hand, having excess stock, can take up valuable warehouse space and incur unnecessary charges. Either way, you look at it, it comes at a cost to your business.

Fortunately, with free inventory management software, you can track low stock levels and identify the re-order points for each product, in turn avoiding the occurrence of stock-outs.

The ability to make more profitable business decisions

Effective free inventory management software can provide invaluable sales data, allowing for more data-driven business decisions.

As an example, with a more informed understanding of supply and demand, you can go some way to forecast sales trends, giving you a more competitive edge.

With access to reporting features and inventory metrics, many inventory management systems equip you with the tools needed to make strategic decisions.

But, why choose free software?

If you’re not sure which inventory management software to use then you should consider available free options, so you don’t have to commit to something you may find difficult to use.

Free inventory management software will get you used to using various features so you have a better idea of what you’re doing, and what you need. Moreover, it will help you at least get started!

It is such a good idea to have something in place and organized at the start of your business for managing your inventory, and if you have to change later you can usually export the data into whichever program you decide to switch to!

Also, it doesn’t cost you anything. This provides the ROI justification to implement it. Second, it helps you improve the customer experience you have to offer.

The free software automatically tracks your inventory and alerts you in case of a shortage. With this automation, you can significantly reduce the chances of order cancellation.

A free inventory management solution will trigger business growth in two ways: you save on software costs and reduce revenue losses due to canceled orders.

Let’s have a look at the top 10 free inventory management software:

1. Odoo – Free Inventory Management Software

Odoo Free Inventory Management Software

Pros

Odoo’s free inventory management software comes with a free downloadable version.

Its modern interface allows you to control and monitor your incoming orders, manufacturing orders, scrap products, pack products, receipts, and much more easily and quickly without any complications

Odoo Inventory is fully integrated with manufacturing, purchase, and sales and thus keeps every function on the same page.

The software allows you to automatically schedule all your orders based on your sales order request. It has various features like a mobile dashboard, advanced routing facility, and smart scheduling.

Cons

It gets expensive if you are planning to purchase multiple Odoo apps. One single standalone Odoo app is not sufficient to use.

2. Zoho Inventory

Pros

Zoho Inventory’s free version is perfect for small and growing businesses. It is a complete inventory control system that helps with creating sale strategies, managing reorder points, generating insightful reports, and much more.

With Zoho, Inventory status is automatically updated across all sales channels. Also, can track transfer orders using a specific batch or serial number. The key feature is its dashboard that gives you a quick view of sales order status- pending, invoiced, delivered.

Cons

The lack of BOM (Bill of Material) functionality is a huge disadvantage of this free inventory software. Companies are forced to use a more time-consuming functionality instead of this feature.

Also, there are issues in syncing real-time data when you are managing e-commerce orders.

3. Zhenhub

ZhenHub Inventory Management Software

Pros

ZhenHub is a cloud-based logistics and inventory management solution for small and midsize businesses (SMBs). Its free version offers inventory tracking, shipment tracking, and warehouse management.

ZhenHub’s USP is its shipping management functionality that integrates with multiple shipping solutions such as DHL and FedEx. It lets you schedule, manage, and track orders from these providers.

Cons

ZhenHub charges both sender and receiver fees for international transfers, which can make billing costly. It can sometimes take time for the shipping status to sync up with the shipper’s account.

4. InFlow

Inflow Free Inventory Management Software

Pros

Inflow is another ideal free inventory management software to keep your business running. It saves your time given to paperwork, helps in accurately meeting your customer’s requirements, and generates insightful reports.

It has a cloud-based as well as on-premise free inventory management system. All their plans include unlimited customers, warehouses, orders, and products. There is easy navigation because of the simple user interface.

Cons:

There are a lot of differences between the functionalities of on-premise and cloud-based solutions.

5. Ornavi – Free Inventory Management Software

Ornavi – Free Inventory Management Software

Pros

Ornavi combines a lot of business management processes, monitoring, and HR practices in a single hub from where users can also maintain inventory and purchase control.

The system offers simple, yet powerful stock management capabilities, such as importing suppliers’ price lists, rapid quote generation, and multiple units for monitoring and management (boxes, metrics, etc.).

A separate part of this system is dedicated to purchasing orders, where you get a clear view of your minimal stock levels, store manufacturer information, auto-generate orders for shortfalls, and record both lists and prices for each item.

Cons

It doesn’t give a comprehensive overview of tasks.

6. Partkeepr

Partkeepr – Free Inventory Management Software

Pros

PartKeepr is an open-source free inventory management software application developed to help companies reorder items in their stock, and always have a clear overview of the products they have for disposal.

With a blazing-fast search function and a variety of part data parameters being tracked, PartKeepr is a master of its skill, helping companies streamline relationships with distributors, and keeping their customers satisfied.

Cons

Parker requires some technical expertise to operate.

7. RightControl

Right Control – Free Inventory Management Software

Pros

RightControl offers you full control over your stock and inventory.

This inventory management software product is ideal for centralized warehouse management and is perfect for freelance and small-biz service providers.

But it can also be tailored to cater to larger enterprises due to its unlimited size ventures and functionality.

Some of its features include a modern and simplified system that puts in place accurate invoice management, constant stock level monitoring, order management, barcode scanning, and enterprise-level reporting mechanisms for you to enhance stock control.

Cons

Users can play around with it all they want, but with one catch: With the free version, all stock data is removed when the program is closed.

Make sure you’re aware of this before you enter your inventory, or you may end up wasting a whole lot of time.

8. Delivered

Pros

Delivered is a free inventory management software cloud solution, ideal for everyone from small online retailers to large E-commerce businesses. This software allows users to track and control both regular and damaged inventories.

Whenever you create a new customer order in Delivrd, a check is performed to ensure that you have enough available stock to fulfill your custom order.

Another unique feature of the Delivrd Inventory management system is that it allows one to control even the packaging materials.

Cons

It is not that powerful and doesn’t have advanced features

9. Stockpile

Stockpile – Free Inventory Management Software

Pros:

Stockpile Inventory is ideal for small businesses and individual users. It is simple and makes online inventory management efficient, easy, and quick. The software is a big time-saver.

Users, locations, and managed products are not limited. It has various features like an easy-to-use interface, a tiered access model to manage multiple locations at the same time, and excellent technical support.

Cons:

Some users consider the wait time for money transfers from account to bank a bit too long.

10. Profitbooks – 100% FREE Inventory Management Software

ProfitBooks – 100% FREE Inventory Management Software

ProfitBooks is the easiest-to-use free inventory management software on this list!

ProfitBooks offers endless advantages to using its free inventory management software solution. We’ve mentioned their top features and pros below.

Pros:

• Simplify Purchase Workflow: Create Purchase Orders and email them to your vendors with one click. You can allocate the inventory to desired warehouses at the time of recording purchase.
• Stock Control & Adjustments: Record stock transfer between warehouses, stock wastage, raw material consumption, and production of finished goods – from a super simple interface of this free inventory management software.
• Maintain Product Batches: Organise products in different batches and specify batch numbers, manufacturing dates, and expiry dates. This helps a lot if you are a manufacturer or deal with perishable goods.
• Create Multiple Users: You can add multiple users and even assign them specific roles. For example, an employee with an ‘inventory manager’ role can only access the inventory function.
• Maintain Multiple Warehouses: Create multiple warehouses to store inventory. You can even call them Store, Location, or Godown as per your business needs.
• Support Multiple Currencies: ProfitBooks Trade supports all the major currencies. You even get a report that shows gain or loss due to currency fluctuation.

ProfitBooks’s cloud-based inventory management system automates your unique workflows and accelerates purchase requisitions.

You can convert Purchase Orders to Purchases in one click. The system connects with accounts payable, cash management, and inventory, so you don’t have to enter the same information twice.

Cons: The mobile application of ProfitBooks’ free inventory management software can be improved, as the UI is not at par with the easy-to-use software on a desktop or PC.

Conclusion

In conclusion, finding effective and free inventory management software can be a challenging task. However, not all inventory software is created equal, and ProfitBooks stands out as a powerful, user-friendly, and 100% free inventory management software solution.

While there are many inventory management software options available, we’ve highlighted the top 10 free choices, with ProfitBooks standing out as a standout solution. It streamlines purchase workflows, offers robust stock control, and supports multiple currencies.

Choosing free inventory management software is a wise move, allowing you to get acquainted with various features, improve the customer experience, and reduce the chances of order cancellations.

ProfitBooks, in particular, offers a user-friendly experience. So, make the right choice for your business needs and watch it thrive. Get your 100% FREE account now!

Also Read:

Top Ten Business Software With A Free Plan

Best FREE Lead Generation Software For SMBs

Top 5 Software To Help Sole Traders.

5 Kickass Cold Email Software

Free accounting software for small businesses

The post Top 10 Free Inventory Management Software For Your Small Business appeared first on ProfitBooks.net.

Each aspect of your business is equally important, but if there’s one that stands more crucial than others, that would be the point-of-sale (POS). It’s the moment when a potential client finally transitions into a paying customer.

Most businesses already have an established point-of-sale system.

For brick-and-mortar stores, that would be the cash register or checkout counter. For online shops, it’s the order confirmation and checkout page.

There are various types of POS systems, as well as different reasons to get them. In this article, we are going to talk about what a POS system is, how it works, and how you can use it to your advantage.

What Is a Point-of-Sale System?

In a nutshell, a POS system is the platform that manages the purchase transaction. It can vary according to your type of business and industry.

Most POS systems these days have gone digital already, though. This modernization has made them more accessible not just for business owners but for their customers as well.

How Do POS Systems Work?

POS systems are very straightforward. The first step that POS systems perform is to collect all the orders.

Analog systems do this by scanning the barcode of the product and computing the total cost.

Digital systems are faster since they collect their data during the main shopping process.

They will then record and collect them in the customer’s digital shopping cart. This provides more transparency and convenience, just in case a customer changes his mind. It will also free up your personnel since there won’t be a need for a cashier to process everything anymore.

Once the shopping is done and the customer is ready for payment, the POS system will then calculate the total and get the system ready to receive payment.

At the end of the process, the customer then pays for the products (or services), the system accepts the payment and creates a receipt. Analog POS systems will usually print out the receipt. On the other hand, digital systems can send a receipt through SMS or email.

Don’t think that digital systems would only apply to online shops, though. There are a lot of brick-and-mortar stores that are trading their cash register for a POS application. After all, the digital POS system simply offers more benefits.

The Benefits of Using a POS System

Here are just some of them:

• It collects more data and provides invaluable information. Tracking your bestsellers will be more challenging with just a cash register. Digital platforms allow you to collect more data about the purchase habits of your loyal customers.You won’t even need to compute important metrics like your average customer spend and purchase frequency.

• It is more convenient. Have you ever experienced getting your order canceled as a customer? It usually takes the service personnel a few minutes to locate the product that you want to void and cross it out from your receipt.This hassle is significantly prevented when you use a digital system since most of them allow you to remove items in a couple of clicks (or taps).

• It sets up room for expansion. It is very easy to integrate new payment methods with a digital POS system. They can also allow you to add other features like adding a POS financing software.

How to Attract More Customers with a POS System

The biggest benefit, though, is how it attracts more customers, and that’s because of the following reasons:

• Quick Payments. A POS system makes payments faster. It automatically calculates the total as the products are entered. It also allows customers to switch between payment methods easily.
• More Personalized Customer Experience. A POS system can collect and record your customers’ information within their platform. From personal information like their name, address, and contact information. It can make your marketing efforts more targeted and personalized. The analytic reports can also help you make smarter business decisions moving forward.
• Automation and Inventory Management. One of the features that make a POS system more ideal for us is the automation features that it provides, especially when it comes to inventory management. How many times have a customer ordered something that you no longer have in stock?
  This would have been easily prevented with a POS system that automatically records each purchase and tags inventory items that need to be replenished. Some platforms even allow customers to file for a pre-order of out-of-stock or upcoming goods.
• Better Security. Most POS systems have built-in cybersecurity features that will protect financial information from unknown intrusion. Double-user authentication, for instance, can prevent fraud and access of malicious users into your system. While we have said that a POS system is more accessible to your customers and employees, it will still depend on how you’re going to manage it. After all, you can always grant, limit, or block access to whoever you see fit.
• Encourages Customer Loyalty. Due to the numerous conveniences, we have mentioned above, a POS system can do wonders to increase customer loyalty. In fact, recent statistics point out that 80% of customers are more likely to purchase from a business again if they offer a convenient and personalised shopping experience. This will help you with customer relationship management.

How to Choose a POS System

Are you ready to transition to a digital POS system? Then here are the factors that you should definitely look into before you choose your platform.

Cost

There are a lot of fully digital platforms that can grant you access after signing up for their services. However, brick-and-mortar stores would require to pay certain hardware costs to get it going. This hardware can include a specific barcode scanner, a display unit, a card reader, a receipt printer, and a terminal.

You can purchase these pieces of equipment separately. A portable digital device like your smartphone or tablet can double as a display unit. However, you will still need to get a terminal if you want to offer card-based payment methods.

Most POS providers offer interest-free financing and installment payment plans. A lot of them also offer multiple packages that allow newer (or smaller) businesses to start with a more affordable plan that they can simply upgrade later on.

Ease of Use

POS systems should be straightforward to use. We highly recommend working with a provider that offers free training, or at the very least, instructional videos.

Reporting and Analytics

You might have noticed already, but we take these features very seriously. For us, a POS system isn’t complete if it doesn’t record data, provide automated reporting, and offers a variety of exporting features. There are even platforms that come with accounting and inventory management tools.

Integration and Scalability

Finally, an ideal POS system can grow with your company and integrate with future technological developments such as machine learning and artificial intelligence. It would also be nice if it could fit in seamlessly with the other digital platforms you might already use, like accounting and payroll tools.

While there is no perfect platform due to the varying needs and preferences of business owners, there are platforms out there that are willing to partner up with other companies to provide you with a more holistic and streamlined experience.

Conclusion

A POS system might revolutionize how you’re conducting the payment processing of your business. Not only can it make your payment processing faster and more streamlined, but it can also increase the productivity and efficiency of your staff, as well as provide more flexibility and convenience for your customers, as well as improve your customer management in the processes.

If you are looking for an easy to use software for managing inventory, please check ProfitBooks.

It offers simple tools to track inventory lifecycle from purchases to sales. Get it free.

The post What Is POS System and How It Works? appeared first on ProfitBooks.net.

A company’s inventory is one of its most valuable assets. Be it retail, manufacturing, food service, and other inventory-intensive sectors, a company’s inputs and finished products are the core of its business. Inventory management software is a small investment that can give you massive returns.

Managing that inventory is again a significant task for businesses. An inventory management system comprises all the processes like ordering, storing and using a company’s inventory. These include the management of raw materials, components, and finished products, as well as warehousing.

Without inventory going out, there is no money coming in.

Even more important than inventory visibility, is keeping track of the inventory. That is the key to running an efficient and profitable business.

Inventory management has a real impact on cost management, especially for small business. Poor storage can damage the warehouse’s  inventory. It is, therefore, essential for a company to optimize its inventory management.

If you are a business owner, you must be aware of the business needs. Demand and other critical parameters such as delivery times, the specificities of suppliers, or market trends. With an inventory management solution, it will be easier for you to determine the quantities you need and when you need them.

Want to learn more about Inventory Management? Read our detailed article on Understanding Inventory Management.

What is inventory management software and why do you need it?

An Inventory management software is a software solution to track inventory levels, order processing, sales, and deliveries. For example, manufacturing industry can use it to create a work order, bill of materials and other production-related documents. According to an article from Entrepreneur , “Companies can increase their profitability 20 to 50 percent or more through careful inventory management.” Those numbers are significant.

Nowadays more and more companies have started using inventory software because the return on investment (ROI) for management software is enormous. Also, it will help you avoid product overstock and outages. It is a tool for organizing inventory data that before was generally stored in hard-copy form or in spreadsheets.

Small businesses usually use MS Excel as a means of managing inventory. But its scope becomes very restricted to business growth. If you are a trader, wholesaler or a small manufacturer, you should consider investing in a good inventory management software.

There are large amount of inventory software out there. However you should choose one that fits your business needs.

Important factors of an inventory management software

Let’s have a look at some important factors to consider when choosing an inventory management software.

1. Versatility

 It is important that the software is adapted to your business and that it corresponds to your needs. It will have to be versatile to facilitate the work of your employees. The inventory software you choose must evolve with your business and always meet your needs.

2. Free Trial

As for all software, before making your final choice, it is recommended to test a free version of the software. Once you go through a free version for 30-days or more, you can assess how it is benefiting your inventory management (or not). You can also analyze the user interface, data security and possible hardware expenses during free plan. The free version can be checked for effective business solution ,carrying costs and core features. Then, after contemplation of pricing plans and cost savings, opt for it accordingly.

3. Budget

 With proper inventory system, you can find publishers who offer very accessible solutions. However, if you have specific needs for your business, this will have to be taken into account in the budget. Also, be sure to choose a reliable provider with excellent service.

4. Integration

 Your software must be able to integrate everything together so that all your business activities are in one place. Using multiple software for different purposes also causes chaos, so this is a super vital feature to have in your software.

5. Flexibility

 The software that you choose for your company should also be flexible enough to adapt to changes. It is an essential feature because many things in a company process might change. These changes should not mean changing the centralized platform all over again but being able to adapt to the nuances.

6. Possibility to Customize

 Another essential point to note in inventory management software is the possibility to customize it as per your needs. A generic software covers all the necessary things. But you always need to have some personalized features to make sure that it covers everything that your business requires.

7. Your Requirements

 Following the points as mentioned earlier, you need to have the possibility to have all your requirements fulfilled in some or the other way. Even if it takes some customizations, that is not a problem. But in the end, the software that you get should fit your requirements perfectly.

8. Ease of Understanding

 Another essential feature is the ease of understanding and use of this software. Your employees should find it easy to work with the software. It should not be something super challenging, and employees should be able to navigate through the software after a few trials while at manual processes.

9. Customer Support

Excellent customer experience is also an essential factor to consider because there can be unexpected problems with the software. In such a scenario, you should be able to contact customer support immediately. In addition to that, you must also check that the workflow is well-trained to handle issues. The turnaround time for problem-solving should be short, as well, so that you don’t have to wait too long for it to be resolved.

10. Overall Cost

 The overall cost of using and maintaining the software should not be skyrocket. It should be good enough to be a part of your yearly or monthly budget. If it puts a hole in your pocket and does not give you the required returns, it is not the right one for you.

Five-Step Process in Inventory Management

Based on these two crucial aspects, four combinations are possible, and the fifth step is to bring everything together. They correspond to many methods of management:

1. Replenishment method:

It is also called the “calendar method” and consists of a fixed-price, close-to-the-world order. So, you replenish your requests based on a particular date that is already fixed in advance. This also involves having a fixed price.

2. The point-of-command management method:

It adopts a variable date ordering system but has a fixed quantity since it is the reaching of the level of the stock (called, the control point), which triggers the replenishment order.

3. The second aspect of the replenishment method:

It is a question of having a fixed date for the variable size of the world. It considers the size of the variable and replenishes the stocks accordingly on a fixed period.

4. The order replenishment method:

It consists of ordering a variable quantity, with a variable date, according to the demand. So, this is the third type of replenishment method where demand plays a crucial role.

5. Development of an Action Plan:

In this process, you combine all the inventory management processes together so that it is cohesive, and you can make the most out of it.

Frequently Asked Questions (FAQs)

1. How is an inventory management software effective?

The inventory management system will allow you to reduce all issues of out of stock or overstocks. This will result in a significant reduction in storage costs. It can be a vital tool for businesses with extensive inventories as costs in this area can increase very quickly. The goal of effective management system is to have the right number of products at the right time.

2. How does an inventory management tool work?

Thanks to the inventory management solution , you will know your stocks in real-time, and you will have a detailed history of supply chain. Besides, you can manage your inventory data numerically, valuing your inventory, and even issue delivery notes. Knowing your stocks is possible, thanks to the reports provided by the management system. This allows you to have all the necessary information quickly and clearly to make strategic decisions. Thus, optimize the performance and costs of your business along with inventory optimization.

3. What happens when an inventory is poorly managed?

The problems of poor inventory management are additional costs of conservation, acquisition, but also depreciation of channel inventory along with supply chain management. This leads to losses in the long run because of extra charges for no reason.

4. How can inventory management software make a difference?

Some software allow you to help you manage stock level, manage supplies but also manage the labelling of your products and bar-codes. The software solution can be beneficial in order management ; it allows you to reduce the risk of error significantly. It can function as accounting software, inventory control software, supplier management ; quite literally an all-in-one business management solution.

5. What is the risk in the event of mismanaging stocks?

Many risks arise out of the mismanagement of stocks. Following are the two major ones:

• Overstocking

It results in significant costs (logistics, for example) and the risk of obsolescence in inventory system. Obsolete inventory is always an additional burden for any business. It takes up space and cost but does not bring any returns.

• Under-storage

It can result in stopping the production, and an inventory item might not be available during the sale. This can also cause problems for the smooth functioning of your business.

In this respect, it has been shown that proper inventory management is based on two main factors: the date of the order- purchase order and sales order and the quantity ordered. Indeed, it is possible to order either a fixed time or variable date. Just as the quantity ordered can be adjusted or variable.

6. What are the advantages of using inventory management software?

The three main benefits of the inventory management tool are, therefore:

• Control of quantities: You don’t end up with a massive amount of things where you don’t know what to do with them.
• Expenses management: You can manage your expenses much better and anticipate demands
• Better organization: You are much better organized and prepared for the future

Conclusion for choosing a suitable inventory management software

To conclude, one may rightly say that an inventory management system can be a lifesaver for retail businesses, esp. growing business.

Thanks to inventory management software, it will be easier for you to plan your activities. You will be able to anticipate the demand for inventory item and thus have the supplies more efficiently. You will then be much more productive and faster in addition to reducing your costs. Overall, it can save you a lot of time and money and help manage orders.

Therefore, having good software solution is the way to go. Choosing correct software solution is a task. You can go for a simple trial version if you want to walk through it first.

Are you still confused? Do you need expert advice? You can get in touch with us, and one of our experts will help you develop an action plan to provide you with the best management for your stocks. We will be happy to give you a free demo of our software.

We at Profitbooks offer you a 30-day free trial where our trained executives walk you through the software. It lets you get a glimpse of how it can change the way your business currently functions.

Sign up for a FREE trial and get started!

Also read:

Inventory Management Basics

12 Inventory Management Techniques To Cut Losses

Inventory Control Methods

How to deal with surplus inventory

The post How to choose an inventory management software appeared first on ProfitBooks.net.

A common challenge for both small and large companies is how to handle inventory problems and solutions. The many processes involved in inventory management mean you need to keep a careful eye on your items. Knowing this is crucial for understanding inventory inefficiency.

Otherwise, your products can easily get lost or damaged. This task can become even more challenging without the right tools and strategy.

Impacts Of Inventory Management

Inventory management is an essential element for operating a profitable business. A recent case study concluded that this has a positive and significant relationship with a company’s profitability. It said that 36% of the increase in a company’s profit can be attributed to the improvement in its control and transparency.

On the other hand, handling this area poorly can cost your company time and money. Worse, it can even cost you your entire business as well. You can easily lose track of your stock levels without efficient inventory management. This can result in either overstocking or understocking.

Both of which could further cause:

• Missed sales
• Lost customers
• Excessive warehousing costs
• Exceeded product’s shelf life (spoilage)

There have been many stories of large corporations losing billions of dollars due to inventory inefficiency resulting in frequent stockouts. Hence, you must identify what are the factors affecting inventory control to avoid potential issues along the way.

5 Factors Leading To Inventory Inefficiency

5 Inventory Inefficiency Factors

1) Lack of proper planning

The management of an inventory deals with more than just stock levels. It also involves the sourcing, storing, and selling of your products. Hence, it deals with multiple locations, agencies, and processes at once. Each one is interdependent with one another.

When one part encounters an issue, the whole operation can be affected. This can be in the form of delays, liabilities, or stock damages. Failure to plan each step of your can cause inventory inefficiency.

For example, a flower shop failed to plan for Valentine’s Day. As a result, they forgot to increase their orders of flowers in preparation for the event. So when Valentine’s Day finally arrived, they ran out of flowers to sell, and thus, missed out on gaining more profit for that day.

If the florist would have planned ahead of time or used inventory management software like ProfitBooks, this loss would have been avoided.

Planning is a crucial element avoid inventory inefficiency. This will allow you to determine whether or not your stock levels are sufficient for the time being.

To help you with your planning, you can hire people with careers in logistics. These are individuals who are responsible for developing and implementing logistics plans which include inventory & warehouse management, plus procurement.

avoid inventory inefficiency

2) Miscommunication and poor coordination

Having a plan is only the first step in your avoid inventory inefficiency operation. You must also make sure that everyone involved in the process is adequately informed of the plan. This includes your suppliers, vendors, warehouse managers, transporters, and the rest of your employees. Any miscommunication at any part can result in poor coordination among the stakeholders.

Unfortunately, miscommunication and poor coordination are common issues in inventory inefficiency and disruption in the supply chain. This is especially true when it comes to dealing with your suppliers and vendors.

After all, suppliers and vendors are separate entities from your business. They aren’t as bound to follow your orders compared to your employees. Hence, they can sometimes become unreliable and unpredictable factors in your inventory operation.

You must vet your suppliers and vendors properly. Make sure that you only partner with reliable companies so that you can avoid any conflicts in the long run. This requires you to do your due diligence and research the background of any potential partner companies before you agree with them.

Inventory inefficiency management in Profitbooks

3) Failure to monitor

Another factor leading to Inventory inefficiency is poor tracking or monitoring. While trust is an important element in maintaining proper coordination with the stakeholders in your inventory operations, it isn’t enough to ensure that everything will go smoothly.

Anything can still happen at any time, especially when you least expect it. It is important that you can immediately act on it before things get worse. As it may cause not just inventory inefficiency, but also can cause other issues.

What you need is proper tracking and monitoring of your inventory process. Without it, you might only find out about the issues in your operations when it is too late. By then, the damage would be done, and you have no choice but to pay for the consequences.

Consider investing in inventory management software, like ProfitBooks One of the benefits of an inventory system is that it gives you a comprehensive overview of your inventory operations. It informs you of the conditions of your products upon their arrival at the warehouse up until it reaches the shelves.

This way, you are always aware of the whereabouts and conditions of your stocks.

4) Inaccurate forecasting

Your planning is only as good as your forecasting. So when you are dealing with inaccurate data and forecasts, your plan might cause inventory inefficiency as well. Let’s go back to the previous example with the flower shop.

Knowing that it’s Valentine’s Day is not enough data for you to determine how many flowers to order from your suppliers. You can still end up overstocking or understocking your shop.

But if you have historical data on how many sales you made in the past years during Valentine’s Day, you now have a clearer idea of how much stock you should prepare for that day.

On the other hand, if the historical data itself is inaccurate, then your forecasting will be inaccurate as well. Hence, you still risk overstocking or understocking your flower shop. This can sometimes happen if you only rely on manual data gathering and analysis. Hence, you must invest in reliable data and analytics tools. You can set up a more efficient plan with better forecasting set up a more efficient inventory management plan.

5) External and uncontrollable factors

Sometimes, even with all the planning, coordination, and accurate data you have for your inventory operations, you might still encounter some problems. This is mostly due to external factors affecting inventory operations that are beyond human control. This includes the weather, natural calamities, accidents, and minor coincidences which can result in stock damage.

These are factors that nobody can anticipate—even with all the sophisticated analytics and forecasting tools. The best that you can do is to set extra measures as precautions. For example, you can get insurance for your products to minimize the loss in case it gets lost or damaged due to natural causes.

Track inventory to avoid inventory inefficiency

Overcoming the challenges

Managing inventory and avoiding inventory inefficiency can be a long and tedious process. With so many factors to consider, it is almost impossible to do everything manually. You need to leverage the right technologies to make sure that everything goes well. What you need is inventory software.

According to a recent report, demands for such software will reach over $5 billion by 2026 as more businesses embrace digital transformation in their processes. The software can provide you with tools to improve control and visibility in your inventory operations. This includes:

• Workflow automation
• One-click purchase orders
• Sales order management
• Inventory tracker
• Report generation

Conclusion

Aside from inventory management software, there are other tools you can use as well.

ProfitBooks, for one, is accounting software that can also help you manage your inventory. Its inventory management feature goes hand in hand with invoice and expense tracking so that you can have a more comprehensive overview of your business’ finances.

So go ahead and check it out. It’s free to get started. 

FAQs

What are some common signs of inventory inefficiency in a business?

Common signs of inventory inefficiency in a business include frequent stockouts or backorders, high carrying costs, obsolete or expired inventory, excessive lead times, and inaccurate demand forecasting. These indicators suggest that the business is facing challenges in effectively managing its inventory, which can lead to various negative consequences.

How does inventory inefficiency impact a business?

Inventory inefficiency has significant impacts on a business. It results in increased carrying costs, such as expenses for storage, insurance, and potential obsolescence. It can also lead to decreased cash flow as capital gets tied up in excess inventory or stockouts affect sales. Additionally, inefficient management reduces profitability, lowers customer satisfaction due to stockouts or delays, and increases the risk of waste and obsolescence.

How does inventory inefficiency impact a business?

Inventory inefficiency has significant impacts on a business. It results in increased carrying costs, such as expenses for storage, insurance, and potential obsolescence. It can also lead to decreased cash flow as capital gets tied up in excess inventory or stockouts affect sales. Additionally, inefficient management reduces profitability, lowers customer satisfaction due to stockouts or delays, and increases the risk of waste and obsolescence.

What are the common causes of inventory inefficiency?

Several factors contribute to inventory inefficiency. These include the lack of real-time visibility into inventory levels and movements, inaccurate demand forecasting, manual processes prone to errors and delays, inefficient order fulfillment systems, and inadequate supplier management. Addressing these issues is crucial to improve the management of inventory.

What are some strategies to improve inventory efficiency?

To enhance inventory efficiency, businesses can implement various strategies. This includes adopting inventory management software to automate and streamline processes, optimizing demand forecasting using historical data and analytics, adopting just-in-time or lean inventory principles to align procurement with demand, streamlining order fulfillment processes through efficient systems, and conducting regular inventory audits to identify and address inaccuracies and obsolescence.

How can technology help in improving inventory efficiency?

Technology plays a vital role in improving inventory efficiency. Inventory management systems provide real-time visibility, automate reorder points, and optimize inventory control. Barcode or RFID technology enables accurate tracking and counting of inventory, reducing manual errors. Data analytics helps identify patterns and trends for better planning and forecasting. Integration with suppliers and customers facilitates seamless information sharing and coordination. Automation and robotics can improve efficiency and accuracy in warehousing and order fulfillment processes.
And if you are a small business owner an investment in Inventory software like ProfitBooks will also work.

Also, read:
12 Inventory management techniques to cut losses
How to choose an inventory management software
How To Setup Efficient Inventory Management System
Inventory Turnover Formula

The post What Causes Inventory Inefficiency & How to Avoid It appeared first on ProfitBooks.net.

A retail business’s inventory is among its most precious assets.

As it has been proven to be the case, in the global ever-growing economy, for inventory-intensive industries such as retail, hospitality, and manufacturing, an entity’s finished products, raw materials, and other components are at the heart of its business.

Therefore, a shortage of inventory at critical times can have devastating effects on the business.

Even though inventory is usually classified as an asset, it can also be considered as a liability.

This is because the stock may get spoiled, get affected by shifts in demand, get stolen, or even damaged.

It is therefore important to ensure that the inventory is properly insured. If a retail company fails to find buyers in time, it may be forced to destroy the inventory (especially in the case of perishable commodities) or sell at throw-away prices.

It is therefore important for businesses that operate in other industries to formulate and implement good inventory management strategies.

In this article, we are sharing some best practices for setting up your inventory management system. These tips will help you cut losses and improve overall profitability.

What are the benefits of good inventory management?

The following are the reasons why organizations should put in place proper inventory management systems:

1) Enhances the accuracy of orders

A good stock management system can help you establish precisely how much inventory your business should have at hand. It can help prevent cases of product shortages and also enable you to maintain adequate stock, without necessarily having too much stock in the warehouse.

Remember that spare capacity in terms of warehouse space is just as important as avoiding running into product shortages.

2) Attract and retain customers

Proper management of stock plays an important role in attracting and retaining customers. There is no doubt about that.

Customer loyalty is what every business yearns for, especially in terms of brand building and identity. Organizations that wish to make their customers keep coming back for more, must have the will and capacity to efficiently fulfill their often varying demands over time.

Proper stock management can help businesses meet their customers’ needs by enabling them to have the right commodities at hand if and when the need arises.

3) More organized warehouse

A proper inventory management system can help your business have a more organized warehouse. An organization with a disorganized warehouse facility can create a very difficult work environment for employees stationed at the procurement and supplies department.

A disorganized warehouse will ultimately compromise your production efficiency.

“Many organizations optimize their warehouse facilities by ensuring that fast-moving commodities are put together in locations that are easily accessible. This strategy speeds up the whole process of order fulfillment and makes customers happy” explains Shop375.

4) Boost productivity and efficiency

Computer software, barcode scanners, and other inventory management tools can significantly enhance productivity and efficiency.

The tools can help minimize or completely get rid of manual processes. As a result, employees can concentrate on more important and urgent issues affecting the entity.

5) Save valuable resources such as money and time

Good inventory management can offer significant monetary and time-saving benefits. You can eliminate the need to recount stock to ensure the accuracy of records by taking real-time stock of all products that you have ordered for as well as stock-at-hand.

A good strategy can also help save time and money that would have otherwise been spent on slow-moving or unpopular products, furthermore it can be beneficial for your market expansion strategy.

Also read – Benefits of using a good inventory management software.

Inventory Management Techniques

The following are effective and efficient strategies that you can use to manage the inventory:

1. Setting per level – involves setting a minimum volume of products that has to be readily available at all times.
2. Drop-shipping – an arrangement whereby the whole inventory process is taken care of by wholesalers or manufacturers. Check out how dropshipping works.
3. First In First Out – selling goods in the order in which they were procured from primary producers. FIFO is suitable for goods such as food products and prescription drugs.
4. Accurate forecasting – involves the projection of future sales while basing on factors such as market trends, overall state of the economy, past sales volume, seasonality, and assured sales from subscriptions, among other factors.
5. Proper relationships management – it is important to establish healthy relationships with suppliers because you may need to return slow-moving commodities, suspend the procurement of certain products or re-stock fast-moving commodities.
6. Using an Intermediary – Foreign companies also have the choice of selling products electronically through an intermediary. If a company does not want to have to handle inventory, this technique is preferred. This liability and allocation can be transferred to the intermediary.

Check out the 12 inventory management techniques to cut losses.

Tips on setting up an effective inventory management system

The importance of having an effective inventory management system cannot be overemphasized.

Since it involves ordering, stocking, and using a business’s materials or products, it could disturb the execution of orders if not efficiently put in place.

There is a reason why customers like to visit amazon or Shopify. It is not just because they want a trusted destination where they can purchase a wide variety of goods. It is also because there is nothing like running out of stock with them.

If you are into online sales, perhaps you should borrow leaves from them.

Here are some tips they have put in place that have made them very effective.

• Have at least one person responsible for inventory. This will ensure that someone always has ready answers for any questions on inventory.
• Amazon and Shopify both use inventory management software. Though they have different software for the same purpose, there is no doubt that it helps them make things easier.
• Have a backup system in place for when data gets lost
• Use POS to track sales automatically.
• Do not spend too much on something that is expensive to store
• Always bargain with suppliers and consider if it is cheaper to buy in smaller quantities
• Have an effective inventory tracking system.
• Have a central database for this tracking. You can use a google spreadsheet so that all changes are immediately visible to everyone.
• Implement a proper stock optimization procedure so you don’t run out of inventory.
• Have discounts and promotions to get rid of stock that has stayed for too long. It is better that way than having to dispose of them if they are time-dependent perishable goods.

Other effective inventory management techniques are: prioritizing with ABC, contingency planning, and regular auditing (using methods such as physical inventory, cycle counting, and spot checking).

Good inventory management is without a doubt an important practice for camping companies as well as businesses in other sectors of the economy.

An organization that fails to keep a keen eye on its inventory, or fails to take stock of its accounts is undoubtedly setting itself up for myriads of possible challenges and errors related to inventory.

Final thoughts

Inventory management can easily break or make a business. Keep the benefits described above in mind as you consider the cost of establishing or failing to establish a good inventory management system.

ProfitBooks is a popular inventory management software used by thousands of SMEs. It helps you to manage your entire inventory lifecycle right from purchase to sales.

It also offers tools for small manufactures to record the consumption of raw materials and the production of finished goods.

Best part is, its’ free to get started with ProfitBooks.

Create a free account today and start managing your inventory efficiently.

The post How To Setup Efficient Inventory Management System appeared first on ProfitBooks.net.

Generally, inventory refers to the finished goods. This can also include the raw materials required for the production of finished goods called work in progress.  

Inventory turnover is the measure of how many times a company sells and replaces its goods in a given frame of time. It gives an idea of how well a company is managing its cost and how effective the company is at selling its goods.

A high turnover indicates that the company is selling their goods at a high rate and the demand for their product is high. Meanwhile, a low turnover suggests that the sales of the goods are low and the demand for the product is falling.

Inventory turnover gives an insight into whether a company is managing its stock properly. It also shows whether a company’s sales and purchasing departments are operating synchronously.

Calculation Of Inventory Turnover Formula

Inventory Turnover Ratio Formula

The inventory turnover formula is also known as the inventory turnover ratio or the stock turnover ratio. This ratio is an efficiency ratio. It shows how successfully a company is managing its inventory. It details how much inventory is sold within a period, commonly a year.  

To calculate this ratio cost of goods sold is divided by the average inventory for the same period.

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

Here average inventory is used because companies may have higher or lower levels of inventory at different times of the year.

For example, some companies would likely have a higher inventory before a certain holiday period and lower inventory levels after the holiday.

Average inventory is usually calculated by adding the inventory at the start and inventory at the end of a given period and dividing this by two.

The cost of goods sold is the production cost of goods and services that the company produces. It can include the cost of raw materials and labor costs required for making the goods. Other factory overheads can also be included. The cost of goods is reported on the income statement.

Inventory turnover will be more refined if the labor cost and other overheads are removed from the cost of goods. This will give more attention to the cost of materials.

The period in calculating the turnover ratio is usually taken as a year. Dividing the year into different quarters and calculating the average inventory of the 4 quarters.

Days In Inventory

The days in inventory (DII) is a financial measure of a company’s performance. It gives an idea to the investors about how long it will take the company to convert the inventory into sales. DII has its formula and is used by accountants and bookkeepers across the globe.

It is always preferable if the DII is low because the goods produced are being cleared from the company’s stock at a high rate. It is important to note that the average DII changes from one industry to another.

DII is also referred to as day’s inventory outstanding (DIO), day’s sales of inventory (DSI), or simply day’s inventory.

It is calculated as:

DII=inventory cost of sales*365 days

DII=365 days inventory turnover ratio

The DII is the first stage in the cash conversion cycle, which represents the conversion of raw materials into cash. The DII is another measure to check the effectiveness of inventory management.

Calculating the number of days a company holds on to an inventory before it is sold, the length of time the company’s cash is tied up in inventory can be calculated.

The DII varies greatly with industry. It is important to compare the DII of one company to another in the same industry.

For example, the companies that sell food items or products that expire quickly have low DII while those companies which sell slow-moving products or non-perishable products tend to have a high DII.

Both these metrics, days in inventory and inventory turnover ratio, help an investor in making investment decisions. It informs the investor of how effective a company is in managing its inventory compared with its competitors.

Studies suggest that stocks with higher inventory ratios tend to outperform industry averages. A low inventory ratio may suggest overstocking, product deficiencies, or poor management of inventory. These are signs which do not bode well for a company’s overall performance.

There are also some exceptional cases where a low inventory ratio is preferred. For example, if the inventory is increased in anticipation of a market shortage or a rapid price increase. If an inventory is selling slowly, then a high inventory is not advantageous.

On the other hand, a shortage of inventory can lead to a higher turnover ratio, though the company may experience a loss in sales. Therefore it is necessary to find a balance between inventory levels and market demand.

Example 1:

ABC is a computer manufacturing company. The opening inventory is $30000 and the ending inventory is $35000. The cost of goods manufactured is $250000. To calculate the inventory turnover ratio:

Cost of goods sold= $30000 + $250000-$35000= $245000

Average inventory= (Opening inventory+ closing inventory) ÷2

                                    = ($30000 + $35000) ÷ 2 = $32500

Inventory turnover ratio= cost of goods sold ÷ average inventory= $245000 ÷ $32500= 7.53

To calculate the days in inventory

DII= 365 days ÷ inventory turnover ratio= 365 ÷ 7.53= 48.47

Example 2:

XYZ is a trading company. The following data is provided for the year 2017:

Inventory turnover ratio= 10 times

Opening inventory at a cost= of $20,000

Closing inventory at a cost= of $40,000

To calculate the cost of goods sold for the year 2017:

Inventory turnover ratio= Cost of goods sold ÷ average inventory

Average inventory = ($20000+ $40000) ÷ 2= $30000

Therefore, cost of goods sold= 10 * 30000= $300000

Days in inventory can also be determined:

DII= 365 days ÷ inventory turnover ratio= 365 ÷ 10= 36.5

What Is A Good Inventory Turnover Ratio?

The higher the inventory turnover ratio the better seems to be the easy answer. Companies that have a high turnover ratio have excellent sales. A higher turnover ratio means that fewer inventories are required to support sales, therefore less warehouse space and capital are required.

To idealize the turnover companies should make certain that the products that are in demand are shipped and delivered to the customers in a short period.

The inventory turnover ratio is limited by certain factors such as replenishment frequency, the reliability of supply, and sales dynamics; it can also be reduced because of the poor quality of the inventory management software system.

4 tips to improve the turnover ratio

There are a few methods that companies use to improve the inventory turnover ratio:

1. To get rid of excess or obsolete inventory their prices are reduced to free up cash.
2. Companies work closely with suppliers to deliver purchases frequently.
3. They create methods to forecast sales demands.
4. Limit bulk orders to big sellers to prevent excess inventory on the shelf.

The turnover ratio varies by industry and it is an individual indicator for each company. The industry indicator is not a measure to follow.

Bottom Line

Calculating the inventory turnover ratio might sound like a technical thing to do. However, when the business grows, it becomes important to stay on top of these numbers.

We can improve only those things that we measure.

It is recommended to use good inventory management software to track your workflow.

ProfitBooks is one of the fastest-growing, leading, and most reliable online software in the world of accounting. With ProfitBooks, you can’t just track expenses but also manage inventory, create invoices and do a lot of things online.

And that too for free!

What’s amazing about ProfitBooks is that it is user-friendly, full-featured, and also has a simple and beautiful interface.

Moreover, it has a mobile application too, which makes your accounting on the go!

Find out how ProfitBooks can help you with your accounting needs!  Create your account for free today.

Also Read:-

How to track small business expenses in 4 easy steps

What causes inventory inefficiency and how to avoid it?

The post What Is Inventory Turnover Ratio? (Formula & Meaning) appeared first on ProfitBooks.net.

As an entrepreneur, you know the struggle of trying to keep track of your stock, orders, and sales without the proper tools. The good news is that there’s a solution that can save you time, money, and countless headaches: inventory management software.

This powerful tool is designed to streamline your inventory processes, giving you a clear and organized view of your stock levels, orders, and more.

In this article, we’ll explore the benefits of using an inventory management software and how it can revolutionize the way you run your business. Say goodbye to stockouts, inaccurate data, and missed opportunities, and say hello to efficiency and growth.

Benefits Of Inventory Management Software In The Wholesale, Manufacturing, Brewing, And Lighting Industry

ProditBooks – Inventory Management Software

Inventory management software refers to its usage in the process of ordering, storing, and using a company’s inventory. These include the management of raw materials, components, and finished products, as well as the warehousing and processing of such items. A company’s inventory is one of its most valuable assets. Be it retail, manufacturing, food service, and other inventory-intensive sectors; a company’s inputs and finished products are the core of its business.

A shortage of inventory when and where it’s needed can be extremely detrimental to take informed decisions.

The Goal Of An Inventory Management Software

Thankfully, technology has transformed inventory management systems for both online and offline retailers. Now retailers can sell more, grow faster, and run smarter. Many businesses are now using inventory management software to stay up in the game and scale their business.

The goal is to optimize the control of the flow of goods and speed up the processing of transactions. And thus contribute to increasing sales figures in the long term.

Besides, integrated management software can also support other business areas, such as personnel management; by simplifying or even automating specific tasks. Well-Integrated management software also provides interfaces (APIs, Application Programming Interfaces) for external applications; such as accounting programs, billing software, and other systems. It helps in streamlining exchanges with online markets such as eBay, Shopify, and Amazon.

If you want to learn more, read our in-depth article on Inventory management systems. Such inventory management software can be very beneficial for decision-making in all types of industries. Let’s check out their advantages in specific sectors one by one.

Inventory Management Software In Warehouses

Inventory Management Software In Warehouses

Inventory software can be equally beneficial for the warehouse management system. It can not only save time and cost but also make sure that the warehouse is fully optimized. The software streamlines various functions and also brings them together under one roof. It makes you rely on one tool to manage all your warehouse inventories. Such tools can help you with several advantages.

Some of the main benefits of inventory software are listed below.

• Purchasing structuring

The control and analysis of purchases are the cornerstones of the e-commerce business. Inventory management programs help you, for example, to better manage your expenses, your needs, and also your offers.

• Sales structuring

The software integrates your data, your customer’s data, and sales information as well as your overall profit. In addition to that, it provides support for the planning and implementation of individual actions. All such as balances, periodic reductions, discounts,s and more.

• Goods receipt

Stock management software takes into account the arrival of the goods. It adjusts the stock and checks its availability for orders.

• Outbound Goods

When a customer places an order, the software takes care of the entire transaction process until it is sent. Also, outgoings are usually controlled by a scanning technique to get a clear picture of your inventory.

• Inventory Management

Most integrated management software has well-designed functions for tracking goods and processing inventories. This makes it easier to structure your warehouse. Many systems can also help manage storage space more optimally. For the software to automate all these domains, it can contain separate modules; for example, a goods receipt module and a module for orders. The necessary information is extracted from the databases and (via the interface) of the online store software used. Examples are the applications such as the bar-code generator reader or the connected cash register software. These interfaces use a specific data exchange format; such as XML or CS and can control transactions on external e-commerce platforms.

With inventory software, ERP (Enterprise Resource Planning) systems are always the order of the day. These systems are used for enterprise resource planning. But generally, have a much more extensive range of functions than pure commodity management systems. They contain, among other things, modules for the management of human resources, documents, and management control. Since many ERP systems also have inventory management modules, they are suitable for online trading.

Inventory Management Software in Manufacturing Industry

Inventory Management Software in Manufacturing Industry

Visibility in the supply chain is crucial in the manufacturing industry.

A software system for the supply chain of the manufacturing industry guarantees you a supply chain correctly connected in real time. From factory and warehouse operations to distribution and local delivery; you benefit from unprecedented agility, traceability, and visibility of goods, events, personnel, and assets. Whether you comply with the latest traceability standards, reduce inventory, manage supplier performance, or adhere to strict schedules; the software is at your disposal.

• Rigorous and precise stock management
• Reduced risk of error in order fulfillment
• End-to-end visibility of the inventory system
• Effective recall management
• Improved supplier relationships
• Effective asset management
• Quality assurance, product authentication, and brand protection
• Efficiency, accuracy, and clarity of critical business processes
• Agile and scalable applications to modernize processes when you need them

Increased efficiency

Moreover, there can be increased efficiency throughout the supply chain.

• Serialization and labeling of products
• Aggregation and creation of an e-pedigree
• Product Authentication
• Checking shipments
• Find out how our packaging identification solution can help your business.
• Warehouse
• Rationalization of upstream logistics
• Improved efficiency and precision of picking
• Reduced stock
• Shipments guaranteed without error
• Discover how our logistics solutions can help you.
• Distribution
• Proof of delivery
• Event tracking and traceability
• Reusable Asset Management
• Direct delivery in store
• Mobile sales
• Find out how our mobility solutions can help you.
• Track & trace all events and merchandise
• Visibility of current and past events and activities to respond directly
• Visibility of all suppliers and stakeholders
• Reusable Asset Management

Inventory Management Software in Brewing Industry

Inventory Management Software in Brewing Industry

From recipe to bottling, from planning to selling; thanks to inventory management software, you can now track your production in real-time. Inventory management software can be of great aid in the brewing industry too. Wherever there is stock, this software has the potential to streamline the entire process. Everything is connected to the stock of raw materials in the brewing industry. So, you can make your business highly efficient by using such software solutions.

Let’s check out some of the advantages of this software in the brewing industry:

• Stocks

Easily tracking stock (beer, goodies, etc.) and raw materials. Send your inventory to your customers with a straightforward click.

• Orders

From quote to customer satisfaction, manage the entire life cycle of an order. Yes, you can do everything with the help of this software.

• Drum tracking

An inventory management software allows you to track logged drums and rental equipment like beer printers. Know at a glance where your barrels are and when they are supposed to come back to the warehouse.

• Customization

Brew and bottling management simplifies accounting and material. So, now you don’t have to take any more headaches, you can put your Excel file in the trash.

• Accounting management

Inventory management software can also handle your accounting functions. It can function just as an accounting software. Take input of the budget, and propose a balance sheet for your Chartered Accountant as a primary goal. It can also possibly export account books on the requirement.

• Cash registers

It is also compatible with cash registers and cash flows. So, your point-of-sale sales go straight back into the platform, and inventory is updated directly in real time.

Inventory Management Software in the Lighting Industry

Inventory Management Software in the Lighting Industry

The lighting industry can also benefit massively by keeping itself organized with the help of inventory management software. You can leave all the functions of your lighting business to this tool and take a backseat. Whether you are a designer or assemble and sell your fittings, or simply import products; this software can help you in many ways by making your inventory management super-efficient.

Let’s check it out in more detail:

• Discounts based on Quantity

With this, you can easily manage the prices that you plan to offer based on the quantity. You can automate the price breaks for each of the lighting products based on the minimum purchase quantity. This will give you a competitive edge over your competitors and can maintain your loyal customers.

• Management of Your Warehouse

As an owner of a lighting business, you might have a variety of products in multiple warehouses. In such a scenario, it can be hard to keep track of your products and manage storage costs. Therefore, inventory management software can be your primary warehouse management system. It will let you know where exactly a particular product is, its availability,y, and other details. All this information can be made available to you only with a simple click.

• Offer Flexible PricingOptionsn to your Customers

You can automate tier-based pricing for your customers. This can help you give proper and systematic discounts, calculate taxes, and have the right pricing. This function works perfectly when you are dealing with a direct customer or when you are dealing with a business.

• Charges for Handling & Shipping

Additionally, you can be flexible about charging your customers for handling and shipping. Youu shall also not be compromising too much on your margins. Automation of this aspect also helps you in being flexible about your freight charges. So you can keep your customers happy without worrying about an additional cost.

Final Words

To sum up, the accumulated business nature and the inventory amount in each business type change. Therefore, it is a need for every company to be well-equipped and organized in dealing with these changes. Of course, so that they don’t incur losses. An investment in the right tool can help with streamlining inventory management and related processes for fulfillment solutions.

It brings all the significant functions together, so there is no need to have multiple tools to handle several services. Only one tool can manage all the tasks and be compatible with all other functionalities within a business. You can always go for a 30-day trial version from a reputed inventory management software like Profitbooks. It will give you an idea of how the software will revolutionize the time.

Also Read:-

How to choose an inventory management software?

What Causes Inventory Inefficiency & How to Avoid It?

How To Setup Efficient Inventory Management System?

What Is Inventory Turnover Ratio? (Formula & Meaning)

Best Inventory Management software

The post Benefits Of Using An Inventory Management Software appeared first on ProfitBooks.net.

Anyway, such stock damages not only affect the financial health of a company with substantial revenue losses but sometimes are also responsible for employee injuries. Right from workplace culture, facility design, material handling equipment, and industrial weighing machines for keeping a check on weight limits to safety equipment, several factors impact the safety of your stock.

Much of the stock losses can be prevented with the help of a few simple measures.

These 5 effective tips listed below can help you avoid not only stock damage but also boost the productivity of your warehouse.

Top 5 Tips For Avoiding Stock Damage

5 Tips To Avoid Stock Damage

1. Create and Encourage a Safe Workplace Culture

The importance of creating and encouraging your employees to maintain a safe workplace culture continually cannot be stressed enough. Stock damage becomes very frequent when this point isn’t taken care of.

This includes conducting regular staff meetings and training workshops. Well-trained employees are more likely to act proactively toward ensuring the safety of products and goods. It reduces the risk of stock damage as well as personal injury.

For example, merely providing a training course for your forklift operators will not only keep them safe during operations but will also reduce the number of products you have to throw away as collateral damage from workplace incidents.

The practices you put in place for maintaining a culture of workplace safety also enable you to know the limits of your employees. This helps in preventing inventory damage as products get damaged, and people get hurt the most when employees involved are pushed past their reasonable limits.

Hence, when you see repetitive incidences of employees damaging products accidentally or injuring themselves, it is time to take a step back and reassess your workplace safety practices.

2. Identify the Responsible Factors For Stock Damage
   

    

   

   Top 5 Tips For Avoiding Stock Damage

The factors responsible for warehouse inventory or stock damage are the first step toward avoiding such losses.

Look for places where your employees are overextending themselves or products are exposed to risk. Are there any places where conveyors would make things safer, can installing a pallet inverter make the operations safer, are there any places where a hoist would be ideal for moving heavy items internally? Even small measures can go a long way.

For instance, providing pallet jacks or investing inappropriate material handling equipment can save you a lot of money and trouble. And it prevents stock damage!

Pallet jacks can considerably improve safety and curtail risks of product damage. Investing in appropriate material handling equipment might feel expensive, given the day-one costs, maintenance charges, and future updates.

However, you will appreciate the ROI on such equipment shortly with reduced workplace injuries and lesser instances of product damage.

3. Redesign or Rearrange Your Facility
   

   

   Identify factors for stock damage

If stock damage is common in your warehouse, it may be time to consider redesigning or rearranging your facility. Right from appropriate lighting to tidying up, there are a lot of opportunities to make your facility safer to reduce inventory damage. Here are certain common measures which can be taken to reduce product damage in terms of redesigning or rearranging your facility:

• The aisles and the walkways are the most frequented areas by your employees, and they are also the most accident-prone zones. Hence, make sure that every aisle and every walkway is clean and clutter-free.
• Weather can also be a significant cause of inventory damage, depending on the location of your warehouse. A lot of stock ends up in waste due to damage from harsh climatic and weather elements. Excessive heat can melt plastic, humidity can make packages soggy and unstable, and moisture can seep into the products leading to significant stock losses. If your warehouse is exposed to harsh weather conditions, consider redesigning your facility to ensure optimal stock protection from extreme weather elements.
• Stock your items according to their weight and shape. Keep the more substantial items near the front of the facility on lower shelves. Place the lighter items in the back of the warehouse on the higher shelves. Rearrange the items as per your operational requirements.
• Ensure that the lighting is appropriate throughout the warehouse. Safely placing a pallet in a tight space with a forklift is difficult, as is. The risk of accident and product damage increases if this is done under insufficient lighting.
• Lastly, keep the workshop floor clean and tidy. Do not leave shrink-wrap on the floor or purchase brittle wooden pallets only to find that your warehouse floor is cluttered with pieces of wood. Ensure that all tools and equipment storing areas are carked. Hang clear and informative signs and visual aids to help the employees operate more efficiently. This is important to avoid unnecessary forklift maneuvering and associated accidents.

4. Keep a Check on the Weight Limits

Collapsed shelves and tipping forklifts are among the most common causes of warehouse inventory damage. Hence it is important to know the weight limits of your shelving and packing areas to reduce product damage and injuries. Make use of the right weighing equipment such as warehouse scales, industrial scales, or floor weighing scales to keep a check on the weight limits and avoid related accidents as well as stock losses. Strictly follow the recommended limits to ensure safety with the help of correct weighing equipment.

5. Invest in Appropriate Safety Equipment To Avoid Stock Damage
   

   

   Invest in Appropriate Safety Equipment To Avoid Stock Damage

Safety equipment is extremely critical for every type and size of the warehouse. A lot of injuries and product damage incidents can be avoided with appropriate safety equipment.

For instance, shelf safety netting helps stop heavy cartons from falling off palletized loads, breaking open, and preventing injuries to employees working in that space. Visibility mirrors though installed for protecting workers, also help prevent incidents of stock damage.

Also, certain steps such as using the right tools, working smarter rather than faster, streamlining and continually improving operational processes, etc. can greatly reduce incidents of product damage. These tips will help you not only avoid stock losses but also maximize productivity through the optimal usage of valuable resources.

Conclusion

In conclusion, by implementing these effective tips, you can significantly reduce stock damage and enhance the productivity of your warehouse. Creating a safe workplace culture, identifying the responsible factors for damage, redesigning your facility, keeping a check on weight limits, and investing in appropriate safety equipment are all crucial steps toward preventing inventory losses and promoting a safer working environment.

Remember, a well-organized and protected inventory leads to fewer financial losses and greater growth opportunities. So, don’t wait any longer–start implementing these measures today and reap the benefits for your business.

Author Bio:

Kevin Hill heads the marketing efforts for scales offered by Quality Scales Unlimited in Byron, CA. Besides his day job, he loves to write about the different types of scales and their importance in various industries. He also writes about how to care for and get optimized performance from different scales in different situations. He enjoys spending time with his family and going on camping trips.

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Inventory valuation generally refers to stock or stock in trade.

In trading, it refers to perpetual inventory meant for resale or unsold goods. A manufacturing concern includes items such as raw materials, semi-finished goods, and finished goods.

An inventory valuation allows your company to provide a monetary value for items that make up its inventory. Inventories are usually the largest current asset of a business, and a correct measurement of them is necessary to assure that you get accurate financial statements. If you don’t properly measure your inventory, your expenses and revenues cannot be matched and you could make poor business decisions.

This is crucial as the excess or shortage of inventory will affect the production and profitability of your business.

The inventory valuation method evaluates inventories at the economic level. These techniques are of great importance when the prices for acquired units are different. Companies should be aware of the inventory cost. Otherwise, they cannot perform the calculations of the cost of the goods sold, nor the value of their existence when the exploitation cycle ends. Due to this, these methods are the perfect tool to know the importance of inventories. It can be done by monetary units and the price of goods that have already been sold over time.

Importance of Inventory Valuation in Companies

Importance of Inventory Valuation in Companies

Because it has a direct relationship with the control and excellent handling of products. Moreover, it allows them to provide the customer with better service and efficient production.

Consequently, the financial administrator of the company must find a way to solve any problem that occurs during the development of operations. This is due to the responsibility in production, the allocation of sales costs, and of the goods that are in the inventory.

Similarly, inventory valuation allows the determination of the economic situation of the company during the period specified and the user management of the operating system.

Within the importance of the inventory valuation, the following objectives are :

• Detention of costs in inventory accounts until the sale of products.
• The proper final inventory value integrates into the state of the economic situation.
• It is necessary to determine the total inventory cost of the purchased inventory.
• The valuation corresponding to the amount cost of sales must be correct when facing the income of the period. It has to be present in the state of the financial situation.

Inventory valuation stocks of supplies and merchandise for consideration should attend value at their inventory cost. The inventory cost is obtained by adding the cost price and all costs directly attributable to the acquisition (incidental purchase costs).

Methods Used For Inventory Valuation

Organizations make precise assumptions about the sale of goods and remain in inventory valuation units. Hence, resulting in a variety of accounting methods. There are two most common methods that retailers use:

• Weighted Average Cost (WAC)
• First-In-First-Out (FIFO)

Although these inventory valuation methods are widely used by businesses globally, the FIFO method seems to weigh more.

Methods of Inventory Valuation

The FIFO (First-In, First-Out) method is more popular than WAC (Weighted Average Cost) for inventory valuation because it reflects the actual flow of goods.

Imagine you have a stack of perishable goods—using FIFO means you sell the oldest items first, preventing spoilage and wastage. It provides a more accurate cost representation by matching recent prices with recent sales, giving you a clearer picture of profitability.

It’s all about maintaining accuracy in inventory valuation. With FIFO, you’re keeping track of the actual order in which items are received and sold. This method is favored in industries where products have a shorter shelf life or rapid turnover.

It’s a widely adopted method that offers transparency and reliability in inventory valuation.

Let’s discuss the WAC method first and then we’ll dive into FIFO.

The Weighted Average Unit Cost (WAC) Method For Inventory Valuation

The Weighted Average Unit Cost (WAC) method consists of calculating a weighted average cost by dividing the total current costs by the total of the quantities acquired.

This is an accounting technique for the valuation purposes of current inventory and has recognition under financial transactions. Companies make certain assumptions about the sale of goods and which goods remain in inventory (resulting in different accounting methodologies).

The calculation of the weighted average unit cost can be made:

• either on the occasion of each entry into stock (especially in the case of permanent inventories)
• or at the end of each period (especially in the case of intermittent stockpiles). It often corresponds to the average duration of storage.

The weighted average cost method (WAC) is generally used for the valuation of non-perishable material stock that can be stored over a long period. In practice, the weighted average unit cost is calculated automatically by the inventory management application used by the company.

The weighted average unit cost at each entry into the stock- The company can update the weighted average unit cost of a product for each new in-stock. At each new entry, the net realizable value adjusts to reflect the latest entry of products at a fixed price.

Calculation Of Weighted Average Cost With Each Entry Into The Stock

The weighted average unit cost calculated automatically for ending inventory valuation is obtained as follows:

WAC = (Previous stock value at the old WAC + current cost of the ending inventory) / Total quantities in stock. The weighted average unit cost may also be calculated at the end of the period. The duration of the period frequently corresponds to the average storage period (stock turnover period) or shorter duration.

By calculating the weighted average unit cost at the end of the period, we must first determine the duration of rotation of the stock. The calculation is as follows:

Stock Turnover Time = Quantities Released for Sales / Average Stock. If the company does not have a permanent inventory, the average stock is equal to the average between the initial stock and the final stock.

Once the rotation period is clear, we add all the inventory costs over the accounting period (we retain all the goods in stock). Then, we divide this amount by the total of the quantities entered in stock in the same period.

WAC = Total inventory cost of entries over the period / Total quantities entered during the period.

Example of application of Weighted Average Cost method(WAC) :

Suppose you added a total of 80 shirts for your inventory valuation, of which you paid $10 per product for 40 of them and $15 per product for the rest. You would calculate the WAC as:

Cost of Goods Sold (per item)= {[Cost 1 X Quantity 1] + [Cost 2 X Quantity 2]} / Total quantity. In this example, Cost of Goods Sold (per item) = {[10 X 40] + [15 X 40]}/ 80 = $12.5 Irrespective of which order you sell the product in, for that period, you will always account for the cost of inventory units as $12.5 per product.

The First-In, First-Out (FIFO) Method

In this method of inventory valuation, you assume that the oldest inventory is also the first one to be on sale. You always sell your oldest goods first. The obvious benefit of this method is that it accurately reflects how most retailers do business.

The first-in, first-out (FIFO) method consists of valuing inventories at the latest acquisition or production costs. This is one of the two overall valuation techniques having legislation recognition; the other technique is the weighted average unit cost (WAC) which is already mentioned above.

For this, the value of each is out of stock at the cost price of the oldest inventory.

Thus, during the inventory, the outcomes of the same category in stock are the most recent.  With the most recent acquisition costs, you can evaluate them.

The FIFO method is tax-only for interchangeable inventory items.

For the evaluation of the products in stock, one uses, in particular, the method of Premium Exchangeable Participating Security (PEPS) with perishable products to take out the oldest articles to avoid that they lose value. The FIFO method has the disadvantage of delaying changes in the prices of supplies and remaining inventory.

Example Of Application Of The First In First Out Method (FIFO)

Here are the movements affecting a product category of a company during the year. Considering that it corresponds to the calendar year and that the company values ??its stocks according to the FIFO method, in :

• January: purchase of 100 products at a unit purchase cost of 10 dollars,
• March: sale of 50 products,
• June: sale of 20 products,
• July: purchase of 50 products at a unit purchase price of 11 dollars,
• September: sale of 30 products,
• November: sale of 30 products,
• December: purchase of 50 products at a unit purchase price of 9 euros.

As of December 31, there are 70 products in this category in the company’s inventory. By applying the FIFO method, outflows value at the cost of the oldest product in stock.

Conclusion On Inventory Valuation Methods

The Weighted Average Cost Method (WAC) and first-in, first-out (FIFO) are two primary methods for inventory valuation. However, it is hard to say if one way is better than the other.

If you are looking to identify the inventory value of your business – then Weighted Average Cost is the best and correct method to use. If you are looking to calculate the Cost of Goods Sold (COGS), then both FIFO and WAC have global acceptance.

FIFO gives a better estimate of your Gross Margins as compared to WAC as businesses generally sell their oldest items well It depends on the type of valuation and what is it that you are looking for through your valuation. Nevertheless, when it comes to inventory valuation methods, it is essential to know your requirements before choosing the right one for you.

Things become much easier if you use good inventory management software. You can try ProfitBooks which helps businesses to manage the entire inventory cycle from purchase to sales.

Also Read:-

FIFO Vs LIFO Inventory Management Technique

12 Inventory Management Techniques To Cut Losses

How To Maintain a Positive Cashflow in Your Business

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In a nutshell, a Bill of Materials (BOM) is the complete list of all the items that are required to build a product. But, it is more than a mere shopping list. A list of material, or the Bill of Materials is a list of all the production and assembly needs of an item.

For example a baker may include raw material such as bread flour, but also the necessary infrastructure for product structure, such as kneading machines and ovens in the Bill Of Materials.

In addition to that, instructions on how exactly production and assembly should work is also a part of BOM. A list of materials is used within all forms of production and assembly: assembly by stock (Assembly To Stock), assembly by order (Assembly To Order), manufacturing by stock (Made To Stock), and manufacturing by order (Made To Order.) A bill of materials usually appears in a hierarchical format, with the highest level displaying the finished product and the bottom level showing individual components and materials.

In a nutshell, it is the complete list of all the items that are required to build a product structure.

A well-defined BOM helps companies:

• Plan purchases of raw materials
• Estimate material costs
• Gain inventory control
• Track and plan material requirements
• Maintain accurate records
• Ensure supply robustness and reduce waste

Types of BOM:

A Bill of Materials is used in almost all fields related to supply chain. Due to prolonged use, there are two activities for which different versions of bill of material were created. The two most important types are: 1) Engineering Bill Of Materials (EBOM) and Manufacturing Bill Of Materials (MBOM) or the list of manufacturing materials. As the names indicate, these lists of materials are specifically designed for the design and production phases of the items.

• Engineering Bill Of Materials (EBOM)

The engineering bill of materials (EBOM) defines the finished product as it was originally designed. It lists the items, parts, components, subassemblies, and assemblies in the product as engineering designed it. The EBOM is often created by the product engineers based on a CAD drawing during resource planning. For a finished product, more than one EBOM may be created.

• Manufacturing Bill Of Materials (MBOM)

This type of BOM is a set of documents that have all the information related to assemblies that are needed to finalize and ship a  final product. It includes things like packaging materials such as boxes, quick start guides, CDs, or any other related item that completes the packaging of a particular thing.

A good BOM always includes certain essential elements:

• Full representation of the inventory item:

A comprehensive, informative description of each material or part must be included in a structured list. This description helps you and others identify individual parts and distinguish between similar parts and materials.

• Unique part names:

Each part, material, or assembly should also include a detailed, unique name that allows anyone to identify the part easily without having to reference other sources.

• Unique part numbers:

The BOM should assign item number to each item, which allows anyone involved in the manufacturing cycle to reference and identify parts instantly. To avoid confusion, each part must receive only one part number.

• Phase:

Make sure to record the lifecycle stage of each part in the BOM. For example, for parts that are in assembly process, a term like “In Production” can be used. Other terms, such as “Unreleased” or “In Design” can be used for item attributes that have not yet been approved. Such terms are especially helpful during new product introductions since they allow progress to be tracked easily.

• The available inventory:

It is the relevant components and material provision ready to use.

• Safety stock:

Minimum amount your company has in case there is a deficit. Safety stock calculations include safety stock days and safety stock percent as gross requirement.

• Temporary raw material:

It is optional, and you may not use it if your goal is to save inventory costs. The component quantity might be a simple list of replacement parts or shippable product or  similar products.

• Lead time(cycle time, delivery time, waiting time, etc.):

It is the time that elapses from when you place the order of an order until it arrives. The product cycle management prefers a note of the the existing or change timeline.

• Scheduled receptions:

Orders of delivery dates in past, might arrive in the next few days.

It is the number of articles, material components, and supplies that are a part of the manufacturing process. If it is a finished product (independent demand), the corresponding quantity comes from the Master Production of Schedule.

A master production schedule ( MPS ) is an inventory plan for individual commodities to be produced in each time period such as production, staffing and inventory. Links go to manufacturing where the plan indicates when and how much of each product demand will exist.

This plan includes significant processes, parts, and other resources in order to optimize production, to identify bottlenecks, and to anticipate needs and completed goods. Since a MPS drives much factory activity, its accuracy and viability dramatically affect profitability. Otherwise, if it is configurable material or component parts with dependent demand, the gross needs will be those dictated by the explosion of needs. So, there is an urgent requirement to define total needs. Using MPS helps businesses avoid shortages, costly expediting, last minute scheduling, and inefficient allocation of resources.

Available Inventory

It is important for you to check the available Inventory, which is a product or material that is available at all times. It is the result of taking the available inventory that is left at the end of the previous period and adding it with the scheduled receptions. Then, subtracting it with the gross needs of that period.

Available inventory = Available inventory from the previous period + Scheduled receipts-gross needs If the available inventory is less than the gross needs, we use the safety stock. Therefore, the available inventory will be equal to the security stock, and the latter will be restored in the next period. Consequently, it will be added to the net needs.

Net needs are obtained when the available inventory is not enough. This implies the obligation to generate an order. In other words, when the net needs are more significant than zero (0), the launch or release of a production order is generated to have the material available when required. If they are less than 0, it means that the available inventory is sufficient to meet the demand so that we will place 0 as a result.

They are obtained as follows:

Example of BOMs

You can generate BOM on excel sheets quickly. And, the best thing about them is that they can be formatted the way you want. However, it is also a bad thing because then, it is easy to tamper with it, and anyone can make changes to it.

This leads to inconsistencies across the BOMs of companies. In such a scenario, generating BOMs through software can be helpful to maintain consistency.

Here is a screenshot of a BOM with some of the necessary details:

Here is a screenshot with the header. It is critical to have some notes on the header to make sure that all the details are mentioned on it.

Frequently Asked Questions (FAQs)

A list of materials comes first in order to schedule the purchase of materials. The material lists determine which needed components should be purchased and in what quantity. Therefore, the configurable materials must have a detail mention in the list of articles. Utensils such as cutters and glue guns are sometimes not in the parent material list. But without buying these tools, it is difficult, for example, to mount a photo frame. Frequently, necessary materials, such as screws, remain fixed in the inventory. However, it may be useful to put them on the bill of materials. The document helps determine the total cost of production or assembly process.

2. How can BOM help?

The Bill of Materials helps by ensuring that production or assembly goes well and at all levels. By adding clear instructions for each step, one can reduce the number of errors. If an employee discovers an anomaly in a product to use, you can also check the steps and instructions above to find out where things could go wrong. For example, if a mechanic at a car factory detects a failure in the engine to mount, he can see with the engine manufacturer, what instructions have performance negligence. However, if the engine manufacturer is an external supplier, you can only indicate where the fault is. The supplier should investigate within his list of materials where the manufacturing process could have gone wrong regarding the instructions.

3. What, when and how much to produce: the Master Program Schedule (MPS)?

You must have a Master Production Program in which you have the number of units produced per time horizon, usually plotted in weeks. This will allow us to know what components and materials we must get and manufacture to meet the quantity defined in the MPS, but not before considering the inventory.

Final Words

To sum up, you must note that regardless of what kind of software or even excel sheets that you use for your BOMs, it is crucial to have all the information in it. Moreover, you also need to make sure that requirement planning is accurate so that you build high-quality products. A comprehensive BOM is also essential because it has all the valuable information to keep a check on it.

In the end, manufacturers rely sincerely on these Bill of Materials to build product. Therefore, you can choose to have either part of the names of quantities or complete information depending on your requirements. Since, there is a tremendous amount of information in a Bill of Materials, companies either use a software or an automated tool to do it. In any case, it is more important to have a BOM with comprehensive information so that it is helpful for future reference.

Profitbooks is an excellent example of a software that helps you manage everything from purchase to sales. You can create bills of material and manage your inventory with ease.

Also read:

Understanding inventory management

Inventory control methods

12 Inventory Management Techniques To Cut Losses

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