![]() The primary challenges of inventory management are having too much inventory and not being able to sell it, not having enough inventory to fulfill orders, and not understanding what items you have in inventory and where they’re located. One element of developing loyal customers is ensuring they receive the items they want without waiting. With proper inventory management, you spend money on inventory that sells, so cash is always moving through the business. This also allows you to keep less stock at each location (store, warehouse), as you’re able to pull from anywhere to fulfill orders - all of this decreases costs tied up in inventory and decreases the amount of stock that goes unsold before it’s obsolete. Understanding stock trends means you see how much of and where you have something in stock so you’re better able to use the stock you have. The two main benefits of inventory management are that it ensures you’re able to fulfill incoming or open orders and raises profits. Companies must document their management processes to prove compliance. Public companies must track inventory as a requirement for compliance with Securities and Exchange Commission (SEC) rules and the Sarbanes-Oxley (SOX) Act. Inventory management is vital to a company’s health because it helps make sure there is rarely too much or too little stock on hand, limiting the risk of stockouts and inaccurate records. Poor inventory turnover can lead to deadstock, or unsold stock. A business does not want more stock than sales. An accounting measurement, inventory turnover reflects how often stock is sold in a period. One measurement of good inventory management is inventory turnover. Therefore, too much stock costs money and reduces cash flow. Before it sells, inventory (although reported as an asset on the balance sheet) ties up cash. The practice identifies and responds to trends to ensure there’s always enough stock to fulfill customer orders and proper warning of a shortage. ![]() It tracks inventory from purchase to the sale of goods. Inventory management helps companies identify which and how much stock to order at what time. At the end, you will find an FAQ list on inventory. In this article, learn about inventory management and its related disciplines from inventory experts.
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