Inventory System: Definition, How to Manage, and Types of Inventory

How to manage an inventory system is important so that a business can run smoothly, because there are times when a business owner does not only have one or two types of goods. Check out the full discussion in this article.

It is common sense that a business owner must provide many items as inventory and consumables to ensure a smooth flow of business. Proper management systems are required to continuously monitor inventory on a large scale.

In business, this is called an inventory system. In most cases, we have inventory. Therefore, the inventory system is a method that enterprises use to manage inventory in their business. To better understand all issues related to inventory, check the following reviews:

Getting to Know Inventory

The inventory language can be interpreted as an inventory, but its meaning may vary by industry. Inventory is usually any goods or material that a company owns and is sold for profit.

In the manufacturing industry, inventory can be a form of raw material and semi-manufactured goods that are stored in a finished product or warehouse ready for sale. Meanwhile, in the service industry, inventory is used to refer to the elements that buy and sell services.

A simple example of a service industry inventory is the empty room of the hotel. Client and Project Information for Consulting Services; Or documents and books to translate in a translation agency.

Inventory Type

To simplify your understanding of inventory systems, you can identify the inventory type, which makes it easier to manage your systems.

1. Raw Material

The first type of material is raw material. We cannot sell directly, but we cannot produce the highest quality product without raw materials. Raw materials are all the ingredients used to make the final product.

For example, in fruit juice production, raw materials are fruit and food sweeteners from various vendors. This material is later processed as a drink. This beverage will be sold and sold. The notion of inventory of raw materials typically exists only in industrial plants.

2. Current project.

In addition to raw materials, the actual work performed before the product is completed can be categorized into inventory. For example, the process of extracting juice from fruits in the process of making a fruit drink is an inventory.

This applies to raw materials as well as finished products that are not yet ready for sale. For example, products and products that fail quality control. This cake is still in stock because it is still in use by a project or task in progress.

3. Completed Products.

Complete products are typically used to refer to products that are sold immediately in the market. This product has gone through all phases of production and quality testing. As before, finished goods are included in the inventory category.

Complete products are one of the key inventories where availability is always reflected in the company's financial statements. This is why finished goods are often used and is an important factor that should not be missed if the company does not want to lose money in inventory management systems.

4. Inventory Maintenance and Repair

MRO, short for maintenance, repair, and operations, is not an inventory category, but is an important part of your company. MRO is typically used to perform maintenance and repair of machines or other tools related to product production.

Examples of items that include MRO include motor lubricants, food cooler, uniforms, bolts, nuts, and screws. D. This type of inventory is typically used in the manufacturing industry.

5. buffer

A buffer is a spare stock in the form of goods to meet unexpected needs or requirements. A buffer is useful in situations such as sudden natural disasters, logistics delays, and strikes.

Buffers are very useful for ensuring business continuity and maintaining stable revenue figures. This is why inventory buffer functionality is important. Moreover, market conditions are often subject to unpredictable and uncertain changes.

By reading a review of the inventory type, you have come to the conclusion that the inventory type plays an important role in the industry. Therefore, appropriate administrative action is required.

How to Manage Inventory

Here are some tips for managing your inventory systems.

1. Specifies the priority.

You should have an inventory that plays a key role in the various inventory types mentioned earlier. Prioritize inventory based on categories created in the first step for maximum administration. For example, place an item in a category that you do not order most often, least often.

This classification helps you manage your finances so that funds can actually be managed. It can also reduce waste to maintain a sound economic position in a company.

2. Record all information about the product

In addition to breaking down into multiple groups, you should also record all inventory information that you have to keep track of items at all times. Populate the record with information about the barcode, lot number, vendor ID, or SKU (Tax Certificate).

In addition to tracking, this step can provide useful information that can be used to determine the selling price of an item.

3. Perform inventory auditing.

All industries must be subject to continuous inventory audits. To continue running inventory systems, audit your inventory for multiple periods, daily, weekly, monthly, or yearly.

The audit can help us determine the exact amount of inventory we have, so at some point the inventory of items that are rarely sold will be reduced or items that are very concerned will increase to improve our financial health.

4. Apply 80-20 rules.

Ideally, 80% of the profit comes from 20% of the goods sold. In Inventory, try to focus on the figure 20%. In addition to improving the company's economy, this step helps you understand the sales cycle and understand which products are the most profitable.

Therefore, ensure that the inventory system has an accurate list of high priority items.

In addition to some of the above tips, you can also use the app's Help.

Overview of inventory systems and management methods. This review allows you to conclude that inventory systems are an important part of your company's operations. I hope this will help.