With material prices skyrocketing and widespread supply shortages, the need to accurately track and manage inventory has grown exponentially. Just last week, I had two separate conversations with companies interested in implementing inventory management software in their Sage products. The initiatives ranged from maintaining a stock of critical, long-lead items to improving control of job-site inventory. Here five recommendations to help guide you on your journey to inventory control.
Commit to inventory management
If you’re not committed to company-wide changes, then stop reading here. There’s no point reading further because inventory control takes a team effort and investment. You’ll likely need to hire or reassign one or more people, depending on the number of inventory locations and volume that need monitoring. Someone needs to be in charge of these locations; otherwise, inventory will move in and out in a chaotic and uncontrolled manner. Oddly enough, inventory can’t manage itself.
Determine the cost/benefit of each item
Be realistic and focus your attention on inventory with higher costs or value of being on hand, like items with long lead times. Tracking every single nut, bolt, or nail may not be worth the effort and may even hamper efficiencies. Why waste the time? Ultimately, resources are limited, so look for ways to get the biggest return.
Control the flow
Understand how inventory flows in and out of your business. Warehouses have an inflow of items through supplier deliveries and job returns, and outflows with job issues, stock transfers, and the like. The more oversight applied to these activities, the better you will understand the state of your inventory.
Also, what are the physical entry and exit points of the inventory locations? There is no sense maintaining complete control at a loading dock when anyone can anonymously come and go through an unlocked back door.
Perform regular counts
Inevitably, inventory counts compared to your records will get out of sync. Inventory will be stolen, lost, misplaced, or counted incorrectly. By regularly counting your inventory, you will ensure accurate inventory records to identify problem areas or inefficient reorder points.
Invest in technology
While tracking inventory can be done manually, it’s hard to argue against the improved accuracy and efficiencies introduced with technology. Barcoding and scanners can quickly mitigate against errors in identifying items and counts and improve productivity. Inventory management software can provide instant access to item counts, locations, value, and daily activity, trigger reorders, and manage the physical count process. Look for inventory management systems that are easy to use and integrate with your accounting and job costing software.
Unfortunately, there are no shortcuts to effectively managing inventory. But, with solid company commitment, understanding of inventory priorities, and thoughtful investment in technology, building a culture and system to protect your inventory investment is well within reach.
Contact Aronson for help with evaluating inventory management systems. As a provider of Sage products, like Sage Intacct, Sage 300 CRE, and Sage 100 Contractor, as well as complementary software, we have deep expertise in guiding companies to the successful adaption of technology.