The importance of inventory control in manufacturing

One of the largest problems that any manufacturing company may come up against is the lack of inventory control. When the inventory of a manufacturing company is not being controlled it is a form of waste. Waste is what threatens the productivity of any manufacturer and raises the cost of any making any type of product. Waste also means that producing a product will take more time and energy, and may be harder on the environment then it should be. Because of the impact of waste all types should be controlled and this is especially important when it comes to inventory control.

Many manufacturing businesses have found that not controlling their inventory has lead to the demise of their business. When your inventory control is not effective then you may not have the right item to produce needed orders. This in turn can lead to losing customers who become dissatisfied with waiting for their orders. Conversely, if you have too much of a type of inventory that is not selling you may find that your cash flow is constantly tied up in inventory and bringing your production process to a halt. The bottom line is that you can destroy your business by having either too little or to much inventory.

If you own a manufacturing business there are steps that you can take for better inventory control. Here are the steps that you should consider when trying to control your inventory-
- Know the cost of your inventory-Manufacturers should always be aware of exactly what their stock is costing them. Keep in mind that this cost should be based on both the cost of producing the item as well as any other costs that are associated with the stock (such as warehousing, transporting etc.) You should also be considering the cost of placing any new orders. Every manufacturing company should have a very controlled purchasing function within their business. When you know exactly what type of inventory you have on hand you will be able to avoid under or over ordering or even ordering to often. It is also important to make sure when you are running a manufacturing company that you are never short of stock since this will halt the production process and slow sales.
- Know what you are selling-It's not only important to know what inventory you have on hand but also what is selling. Inventory control consists of keep track of many different factors that influence sales. These factors include but are not limited to:
1. Total number of items sold
2. Changes in buying habits
3. Seasonal trends in buying
4. General economic conditions
This will help you to figure out the number of items that you will sell and what your reorder point should be. Keep in mind that when you figure you a reorder point you should calculate with delivery time.
- Know that inventory is not static-Do not make the mistake of thinking that you need the same amount of inventory every month. You want to keep a close eye on what is going in your business and then plan what you should order. It can be helpful to keep an inventory checklist and then plan your inventory off of that.
- Know the importance of having a plan-You should always make sure that you have safety stock. This is the stock that will cover the production between the time of an order and when the new stock arrives. You should also plan for any special orders that can deplete your inventory unexpectedly. By having an ongoing inventory control plan you can make sure that you are doing everything you can to control your inventory for the highest profitability.