Update: 02/12/2022


Inventory management has always been labeled a "boring" and "unimportant" job. But, is it true or not, please find out the answer after reading this article.

If your company requires you to maintain inventory, sometimes you will feel your job is extremely difficult as if you are standing at a crossroads and can't find your way. Because you have to maintain a moderate amount of inventory.

If the inventory is too low, it means that you run the risk of being the main cause of the company losing profits from Sales because there is no stock to sell. On the contrary, if you stock up too much, it will cause many additional costs such as pallet rental, warehouse workers, or increased fixed costs ...

That's why Warehouse Management System plays such an important role in the business.

1. Avoid out of stock

One of the worst things you can do is turn your back on your customers who are ready to spend money on your product - One of the main reasons is because of your inventory is currently out of stock. “Out of stock” not only makes you lose the revenue you should have received but also makes you lose that customer forever because they have lost trust and they want their needs to always be fully met.

An effective inventory management system will keep track of how many products are in stock and predict how long it will take to run out of stock based on the activities of the Procurement department. This allows you to order in sufficient quantities to avoid running out of stock.

2. Risk of backlog

When the warehouse is not well managed, you can also have an overstock of some specific items. Inventory also causes many other problems. The longer an item sits in stock, the more likely it is to go unsold and unsold, forcing you to discount or, destroy it. The product will be obsolete and out of date or damaged.

Not to mention that goods left in the warehouse for too long are also prone to environmental damage or theft. Additional costs such as facilities in the warehouse must be maintained if the warehouse is operating at high capacity, or warehouse workers have to work overtime if necessary.

3. The problem of working capital

Warehousing is an extremely important and difficult activity. When you pay $15 for a product from a supplier in the hope that it will sell to cover costs and make a profit. Even though the product is always ready to hit the shelves, its value is locked in stock. That $15 you cannot use elsewhere to invest or do business. So inventory control is not just about managing “what” goes in and out of the warehouse; It's also about managing the business's working capital, keeping you from spending too much money on warehouse operations.

4. From the perspective of the manufacturer

Inventory management is not only a concern of companies that trade in finished goods, like retailers and wholesalers. This is also a very important issue for manufacturing companies.
These companies maintain three inventories: raw materials, manufacturing processes, and finished goods inventory. If your raw material warehouse runs out of stock, production will be forced to stop and stalling will cost a lot. If you don't have enough finished goods in stock to fill orders as they arrive, you run the risk of losing customers.

Putting inventory management first is extremely important to keep production machines running smoothly and products selling.

Phuong Giang

Admin Meksmart