Inventory management is critical to a company's profitability, but many small businesses do not practise good inventory management when it comes to the products they sell. Some businesses have insufficient inventory, making it difficult to meet customers' expectations by supplying enough available products. This frequently drives customers away, sometimes for good, sometimes for good.
Inventory management entails ordering, stocking, and utilising a company's materials or products. Prioritizing your inventory allows you to understand what you need to order or manufacture more frequently in order to meet your customers' needs on a consistent basis.
Many businesses, on the other hand, take the opposite approach, stockpiling items "just in case." Though you'll always have the items your customers want, the risk with this strategy is that you'll lose money. Excess inventory not only consumes valuable cash flow, but it also increases the cost of storage and tracking. Achieving an efficient management process requires more work and planning, your profits will reflect your efforts.
Inventory Types
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Raw materials are the materials used to make your products.
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Unfinished goods, works in progress that are not yet ready for sale
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Finished goods that are typically stored in a warehouse until they are sold or shipped
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In-transit goods are those that have left the warehouse and are being transported to their final destination.
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Cycle inventory refers to products that are shipped from a supplier or manufacturer to a business and then immediately sold to customers.
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Anticipation inventory, or excess products purchased in anticipation of a sales
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Decoupling inventory refers to parts, supplies, or products set aside in anticipation of a production slowdown or halt.
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MRO goods, which stand for "maintenance, repair, and operating supplies," aid in the manufacturing process.
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Buffer inventory, also known as "safety stock," serves as a buffer in the event of an unexpected problem or event.