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What is the scope of the inventory management system?

Jennifer James

June 10, 2021

?It is a dream of every business to earn more at a low cost. Well, this simple-looking agenda is one of the most difficult tasks in business. 

  • How to formulate future plans?

  • How to organize the warehouse to reduce the storing cost? 

  • How to evaluate the inventory?

  • How to measure the satisfaction level of customers? 

  • How to manage financial statements? 

These are some questions that are of great importance to a business. Do you realize? There is something common in all these questions. 

Yes, all the above questions are somehow related to inventory. Inventory and inventory management play a key role in any business performance. There are many questions that arise in your mind as you listen to inventory management. Well, today we try to solve all the confusion. We are going to discuss the scope of the inventory management system and its functional areas. This writing up will help you to know which areas of the business need an inventory management system.

 

Inventory management system (IMS)

An inventory management system that is also known as IMS, is a computer program. Its designs provide a variety of tools and features to handle inventory accurately. It is adopted to ensure the smooth follow of work. 

All business holders are well aware of the fact of the increasing trend of technology and business merging. It is a survival tool for businessmen in this era. Wait, don't be hasty to make the mind related to the inventory management system. Here we ask you to read the topic to the last word. Lastly, we have a bonus tip for your business.

 

  • Formulation of strategies 

There are a number of strategies that are vital for any business.  These plans can’t be formulated without the exact information about the business stock. These strategies include the following:

  • Procurement plans 

  • Storage plans 

  • Accounting plans 

  • Budgeting 

  • Marketing plans 

  • Inventory policy 

 

The change in business performance is only possible due to these plans. Well, inaccurate data put a business in the wrong direction. IMS is needed in the formulations of these basic strategies of the business. 
 

  • Warehouse organization and structure

Yes, an automated system is essential to organize the warehouse management of the business. It helps to decide the following points regarding your store area. Every point has great importance in managing and storing the inventory.

  • Location and layout of the warehouse 

  • Picking and packing points 

  • Tracking tools and methods

  • Easy access to different units of products 

 

  • Control on Cost

No one can ever think to control the cost of inventory without an efficient system. A variety of formulas are easily calculated with the help of this system. 

With a stock of a business, three types of cost are attaches like

  • Purchasing cost 

  • Ordering cost

  • Carrying or storing cost.

What quantity of business should be ordered with possibly less ordering and storing costs? An inventory management system helps to calculate different quantities like 

Economic order quantity, safety stock, minimum order quantity, and others. They are used in the time of need to save the business from extra loss. 

 

  • Evaluation of inventory 

In fact, businesses need to evaluate the inventory at different levels. Whether a business wants to calculate its gross profit or net products. There is a need for the exact amount of cost of goods sold. You can choose a different method of use of inventory like 

LIFO method

FOFO method

Average costing method 

Specific identification number

The selection of methods depends on the types of material and production needs. IMS helps to track at any level for different purposes. 

 

  • Financial statements 

Every business prepares financial statements that show the exact position of the business. The main figures that are necessary for these statements are the production cost. Product cost includes ordering and storing costs. It is difficult to guess the exact production cost without using any inventory management system. In fact, it helps to keep records of damage or spoiled stock.  The loss of damage or spoiled goods is later on adjusted with the sale price. 

 

  • Evaluation of customer satisfaction 

Customer satisfaction is a sign of a successful business. How does inventory software help to evaluate customer satisfaction? It is very simple. The inventory management system keeps the record of inventory from purchase to sale. In fact, the sale is the point where we can evaluate customer satisfaction. Is the business providing the same products that the customers require? How many orders are placed averagely over a period? How many customers do not find their favorite products?  and similar questions clearly tell the level of customer satisfaction. 

 

  • Utilization of resources

Basically, every business has four basic resources that are as follows 

  • Physical or location 

  • Human resources that are employees, staff

  • Financial resources

  • Intellectual resources 

These resources matter a lot to any organization because they are spending on these. It is necessary to make optimum utilization of resources otherwise it will be a wastage of investment.  Inventory management helps you to make optimum utilization of resources. Resultantly, a business can earn higher by optimum use of resources. 

 

Bonus tip 

Hope so, by above all discussion you got the idea of how vast the scope of inventory management is. Here we have mentioned the main areas of the business that really need inventory management systems. It provides a strong base for a successful business. 

We know what questions you have in your mind right now. You are thinking about which inventory management is fit to put your business in the right direction? Right? 

Here is your bonus tip that is trying SeeBiz Inventory for your business just once. It is one of the best inventory management software. We are sure that it will help you to run your business more effectively. It helps you carry out every process from purchase orders to delivery of products in a smooth manner. Another amazing feature of this system is that the use of this tool is very easy. The graphical user interference helps you to understand the commands and tools without any difficulty.  You can generate multiple reports to evaluate the performance of the inventory and over of business.  Even with the help of SeeBiz Inventory helps you to keep a check on business from multiple locations.

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