Optimization Series - Inventory Management
In order to maximize your output, you first have to optimize your input. Optimizing your inventory management and warehouse practices will give you a firm foundation no matter what you are manufacturing.
To put it simply, optimizing your inventory management will help you mitigate damage, reduce spoilage and/or loss, and it will allow you to achieve precision in your profit margins.
FIFO is King
First in, first out (FIFO) is the inventory management method of using or selling the oldest items first. FIFO relies on your team paying meticulous attention when receiving and rotating stock, and it requires consistency in inventory organization and product labeling. The same principles of FIFO organization apply whether your team is operating manually or with automated methods; handwritten labels and scannable barcodes are both effective when your team is paying attention.
The FIFO method is a no-brainer for manufacturers in the food and beverage industry, but it has many benefits for manufacturers of all kinds. Spoilage (or expiration) is a chief concern for manufacturers of consumable products, but FIFO benefits manufacturers of non-consumable goods in cost of goods sold (COGS) calculations too. Because costs of goods can change over time, FIFO allows a linear calculation for your output. Therefore, FIFO has benefits for both your production and accounting workflows.
Technology is Key
When you adopt a cloud-based ERP platform for your inventory management, you have a single source of truth for your operational data. Quantities, vendor information, COGS, and all manner of corresponding analytical data is safely stored and accessible from anywhere at any time. Your warehouse team is the gatekeeper for physical inventory storage; your ERP partner is the gatekeeper for data storage.
In addition to organizing your inventory management, a cloud-based ERP solution allows you to access and sort information by inventory item, lot code, vendor, product bundle, or any other customizable filter necessary for your operation. You can set parameters for minimums or maximums, you can automate your purchasing process, and you’ll see immediate increases in efficiency that pay off in both time and money.
Warehouse efficiency, FIFO inventory management and a cloud-based ERP platform are the keys to optimizing your inventory management.
