Last Updated on October 30, 2022 by Ossian Muscad
Inventory management is a critical part of any manufacturing company. It’s the difference-maker between failure or success. Proper inventory management can help to increase profits, optimize production, and improve customer service. However, improper inventory management can lead to lost sales, stockouts, and dissatisfied customers.
This guide will provide you with an overview of inventory management in the manufacturing industry. You will learn about the different types of inventory and how to manage them effectively. You will also learn about the importance of forecasting and how to create accurate forecasts for your business.
What is Manufacturing Inventory Management?
Manufacturing inventory management is the process of tracking and managing inventory in a manufacturing company. Inventory includes raw materials, finished goods, and work-in-progress (WIP). Manufacturing inventory management helps companies ensure they have the right inventory at the right time.
Effective inventory management can help manufacturing companies to:
- Increase profits
- Optimize production
- Improve customer service
Why is Manufacturing Inventory Management Important?
There are several reasons why inventory management is important in manufacturing:
- Inventory is an important investment for manufacturing companies.
- Inventory can have a major impact on cash flow.
- Inventory can be the difference between success and failure in manufacturing.
Inventory management is important because it can help companies to:
- Reduce inventory levels and save on storage costs
- Avoid stockouts and lost sales
- Improve inventory turnover and optimize production
- Forecast inventory needs accurately
What are the Different Types of Manufacturing Inventory?
There are three main types of inventory in the manufacturing industry:
- Raw materials
- Finished goods
- Work-in-progress (WIP)
Raw materials are the unprocessed materials that are used to create a product. Raw materials inventory includes items such as metals, plastics, and chemicals.
Finished goods are the completed products ready to be sold to customers. Finished goods inventory includes items such as cars, clothes, and electronics.
Work-in-progress (WIP) inventory is inventory that is currently being processed. WIP inventory includes items such as parts that are being assembled or products that are in the middle of the manufacturing process.
How to Manage Manufacturing Inventory
There are several steps that you can take to manage your inventory effectively. These steps include:
- Determining your inventory needs
- Creating accurate forecasts
- Monitoring inventory levels
- Implementing just-in-time (JIT) inventory management
- Utilizing inventory software
Determine Your Inventory Needs
The first step in inventory management is to determine your inventory needs. You need to know how much inventory you need to keep on hand to meet customer demand. There are several factors that you should consider when determining your inventory needs, including:
- Sales volume
- Product life cycle
- Lead time
- Safety stock
- Seasonality
Create Accurate Forecasts
Forecasting is an important part of inventory management. You need to be able to forecast future inventory needs to avoid stockouts and lost sales. There are several methods that you can use to create accurate forecasts, including:
- Sales history
- Trend analysis
- Judgmental forecasting
- Causal forecasting
- Time series forecasting
- Simulation forecasting
Monitor Inventory Levels
It is important to monitor inventory levels to keep track of your inventory and ensure that you have the right inventory. There are several ways to monitor inventory levels, including:
- Inventory count
- Cycle counting
- Bin location system
Implement Just-in-Time Inventory Management
Just-in-time (JiT) inventory management is a system in which a company’s inventory is ordered and delivered only as needed. Just-in-time inventory management can help to reduce inventory levels and save on storage costs.
Utilize Inventory Software
Inventory software can help you to manage your inventory effectively. Inventory software can help you to track inventory levels, create accurate forecasts, and implement just-in-time inventory management. Many different types of inventory software are available, so it is important to choose the right software for your business.
Tips for Improving Manufacturing Inventory Management
There are several tips that you can follow to improve your inventory management, including:
- Keep inventory levels low: inventory is a liability, so you should keep inventory levels as low as possible.
- Monitor inventory levels closely: you should monitor inventory levels closely so that you can quickly identify and correct any problems.
- Create accurate forecasts: you need to be able to forecast future inventory needs to avoid stockouts and lost sales.
- Implement just-in-time inventory management: just-in-time inventory management can help to reduce inventory levels and save on storage costs.
- Utilize inventory software: inventory software can help you to manage your inventory effectively.
These tips can improve your inventory management and keep your business running smoothly.
Use DATAMYTE To Improve Manufacturing Inventory Management
Manufacturing inventory management is best done digitally—that’s why DATAMYTE offers comprehensive workflow automation software that will help you monitor and optimize your manufacturing inventory management system.
The DataMyte Digital Clipboard features a drag-and-drop interface that lets you create digital checklists for all your inventory management tasks. You can use the DataMyte Digital Clipboard to:
- Track inventory levels
- Create accurate inventory forecasts
- Monitor inventory trends
- Optimize inventory management processes
The DataMyte Digital Clipboard is a simple, effective way to improve your inventory management. Book a demo with us to see the DataMyte Digital Clipboard in action.
Conclusion
Inventory management in manufacturing is a critical process. That’s why it’s important to have a solid understanding of the inventory management process. Following the tips in this guide can improve your inventory management and keep your business running smoothly.
