Running a small-scale or even a large-scale company with heavy machinery, conveyor belts, and workers becomes easier over time. It helps if things stay about the same each month because you can save money. But what if you suddenly get many more orders than usual?
You start pumping more fuel into your production machinery (metaphorically) and you get more products out, but sooner or later … a fuse has blown out, or this machine died on you when you needed it the most.
In such times, you wish you had a strategy for making quick fixes and getting the machine components you need quickly. So, in this article, we’re going to talk about strategies you can employ to ensure seamless device manufacturing.
You’ll learn that with a good plan, it’s not hard to have good parts and keep everything organized.
What is Inventory?
Before we delve deeper into the intricacies of enhancing a complex production system with the help of modern technology, let’s first define what ‘inventory’ is for a company.
Simply put, inventory includes the company’s goods or services and it is an essential part of every business. There are companies who can provide some of the components necessary to move around or make your inventory and such businesses are essential in times of crisis when you need a spare part quickly.
If you’re a mechanic, a local hardware store can help. If you sell ags devices, online and offline stores can too. It’s best to connect with these suppliers early in your business.
What Is An Inventory Management System?
With industrial-scale inventory (both in numbers and in size), it is essential to have a system in place that will help you receive items, stick a name tag on them, sort them according to some metric, place them in a storage facility, and retrieve them when necessary.
This is what an inventory management system is for.
There are multiple approaches to how you can arrange your ins and outs of receiving packages, raw materials, and spare parts for giant machines. In the subsequent sections of this article, we will be discussing some of the most successful inventory management techniques that you can employ for your business.
Inventory Management Techniques for Manufacturing
When everything is working like a charm at a steady pace with no sudden changes, it is relatively easy to navigate a complex industrial system.
But what if your business really takes off and starts doing so well that you get a considerably larger order the next month? This is where a comprehensive inventory management technique will come in to save the day.
Below are some of the most common inventory management system techniques that you can utilize to get the most out of your inventory in the long run.
#1: FIFO
FIFO stands for ‘First in, first out’. It’s a simple way to manage inventory. The first item that comes into your warehouse is the first to go out. This method stops old items from piling up and food from spoiling.
#2: JIT
‘Just in time’ (JIT) is a way to save money on storage. Warehouses can be expensive, especially for businesses with a lot of equipment and materials. With JIT, you get supplies right when you need them. This means less storage cost and faster production. But everyone, from suppliers to workers, must work quickly and without delays.
#3: Cycle Counting
Cycle counting is more of a tool than a strategy. It helps you keep track of your inventory without waiting for a big yearly count. By counting often, you always know what’s in stock, what’s missing, and what to order next.
#4: ABC Analysis
With ABC analysis, you rank items in your inventory. The most important items are ranked higher. You don’t just look at the price, but also how crucial the item is, how often it’s needed, and more. After using ABC, you’ll have a clearer idea of which inventory items are most important. But remember, ABC is just one tool. To really manage your inventory, you’ll need a complete system.
#5: LIFO
Last-in, first-out (LIFO) might sound backward, but it’s useful during inflation. When prices rise, LIFO can save you money on taxes. The IRS lets you deduct the higher prices you paid for items, which can help lower your taxable income. This method can be a money-saver when prices are going up.
#6: EOQ
One big way businesses lose money is by spending too much on storing items they don’t need. Maybe there’s a short-term trend, or you just ordered too much – either way, EOQ can help. ‘Economic order quantity’ helps big companies figure out the best amount of inventory to order.
It looks at costs like ordering, storing, and receiving new stock. The goal? Order just the right amount of inventory to avoid extra costs.
#7: Average Costing
Sometimes, you need to step back and see how your business is doing over time. Looking at a few months or a quarter can give you a clearer picture than just one month. To find out the average cost of your items, divide the total production costs by the number of items made. This won’t tell you the exact cost of each item, but it gives you an overview to guide your strategy.
Final Note
In summary, seamless manufacturing means having a strategy in place that can predict and help you adequately react to often unpredictable market changes.
On top of a major inventory strategy, it is also essential to employ as many inventory tools as you can, as they will make your life as a manager considerably easier.
It’s always recommended that you use a combination of an inventory management strategy that you’ve enhanced with newly-developed, digital tools that can help you calculate your average costs, your ABCs, and other useful managerial inventory models.