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Usually, companies do cycle counts to check inventory balances at the end of either each financial year or calendar year. This activity is fundamental in stock management. However, what does the term “inventory management” really mean? Let’s try to define this phrase better.
Proper inventory management has a positive impact on warehouse organization and leads to improved efficiency and productivity levels.
What does inventory management mean?
“Inventory management” refers to an accounting operation that must be carried out to monitor the quantities of stocks that move through a warehouse. This is an operation carried out by logistics operators. Through inventory management, companies are able to know the quantities of stocks on hand, the locations of these quantities, and the availability of these stocks. More advanced inventory management operations also take into account whether these are goods intended for sale, to be used as raw materials or semi-finished products.
Checking inventory levels is a fundamental operation that avoids waste and optimizes the amount of inventory in stock. When this operation is carried out with the help of automation tools, the overall process can bring good visibility to the company, which operators can use to make smarter decisions.
Types of inventory checks
There are different types of inventory checks. Let’s look at a few basic methods.
1. Annual inventory checks
The annual inventory check takes place close to the end of the financial or calendar year. It can also take place at any or arbitrary time, but this must be held consistent year on year. The annual inventory can be painfully laborious. Staff must be properly trained to conduct this type of count. A meticulous count will result in fewer inconsistencies in the accounting inventory. If the inventory is large and the number of SKUs is large, it is better to plan the operation over several working days.
2. Real-time inventory
PIM (Perpetual Inventory Method) allows you to monitor inventory in real-time. This means that each item that enters and leaves the warehouse starts a recalculation of the available inventory in stock.
Real-time inventory implementation can be complex and can require intensive resources. However, it remains the best solution when working with a large amount of SKUs and/or stocks with a high rotation index. The real-time inventory view provides an up-to-date picture of the volume of goods on the shelves.
3. Cyclic inventory check
This inventory management technique is based on a periodic and planned count of one or more parts of the physical inventory of the warehouse. It can be run several times a year and, unlike PIM and annual inventory check methods, has significantly lower costs (in economic and labor force terms).
The advantages of doing cyclic inventory checks:
- Avoid stock outages: You can have a complete and constant view of stock levels with a reasonable level of accuracy.
- Regular quantity update: Inventory control helps reduce errors that occur during the receipt and exit phases of goods.
- Lower complexity: This method is easy to implement.
Sometimes, it may be appropriate to change the type of inventory check to validate the efficiency of the one used previously.
You can change the way you do inventory checks at any time. It is advisable to adapt the technique to the needs that arise over time. This will allow the operator to better organize goods in the warehouse.
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