Advantages of Inventory reconciliation Management
Inventory reconciliation is an internal process in which the difference between the number of units ordered and received by a business is discovered and resolved. In warehouse settings, inventory reconciliation is conducted on a regular basis as part of a company’s inventory management process. Inventory reconciliation helps ensure that appropriate quantities are maintained, that stores of products under evaluation have been evaluated sufficiently to be put back into stock, and that balance sheets are correctly reflecting assets.
If you're in charge of managing the storage for your company's products at any stage in their life cycle, including storing them in arriving forms or distributing them to warehouses for later processing, then you should know how important inventory reconcilation can be.
If your warehouse has a lot of stock, then it is more likely that inventory discrepancies will occur. This is because the large amount of materials stored in a warehouse requires frequent review in order to make sure that the necessary quantity and quality of items are maintain.
Even though you may have followed all the necessary procedures, there are times when there are still discrepancies in your inventory system. And this is exactly where inventory reconciliation comes into play. If the inventory system has no way to monitor for such errors, then it will be easy for them to occur with little or no notice.
Inventory management is a systematic way of ensuring that all the items in your stock are accounted for. The process starts from the moment you open a new product until it runs out and needs to be replaced by another new product. This could go on for an indefinite period.
The process of inventory management involves:
This is the stage where the demand and supply are balanced, so that neither side has an excess of supply nor an excess of demand. This calls for a lot of manpower, planning, and cost in order to keep everything in check. The main goal here is to have as little surplus or deficit items as possible.
Some of the steps in managing your inventory are:
Stock turnover is calculated by dividing the cost of sales by average inventory. This is considered to be an important measure of a company’s success and profitability.
The higher the stock turnover, the greater the business volume that can be carried out within a given time period. This increases sales, profits and shareholder value. Having low stock turnover means that you have poor cash flow as you will continuously have to fund your production line.
Taking into account that resources in a business need to be properly managed, it is also important to take into account the implications of how inventory levels influence cash flow.
When an item is put into production, it is assumed that an equal amount of the same item will then be produced. This creates a surplus of items that needs to be managed. Where there are many such items, and they are not all in stock, then the following scenarios may occur:
By managing the inventory levels of your company based on production forecasts, and forechecking product availability with your suppliers, you must ensure that you do not end up with excess inventory waiting to be processed.
Inventory is one of the biggest costs of doing business. It requires a large amount of cash to maintain it. There are also other costs associated with it such as:
There are three types of mistakes that could happen in an inventory system, and when this happens with such an important resource for your company, then you need to find ways to deal with them in order for the company not to fall into deep financial trouble. Mistakes can occur at any stage or point in the management system, from placing wrong orders, storing products incorrectly, or misreading product labels.
Wanting to manage your inventory does not only have to be about cost saving. You could also make better decisions as a manager by using the information you get from monitoring and analyzing your inventory.
If you are managing your company’s product assets, then you probably know the importance of having a good quality assurance and control system in place. If there are wrong items being stocked or distributed, then this will affect the company's sales volume and directly influence stock prices.
To ensure that the products or goods that go through your warehouse are of high quality, it is important to have appropriate procedures in place for checking them for defects before accepting them for storage or distribution. Below are some points to consider for quality assurance in your inventory management system:
You must be able to guarantee that the quality of your inventory is consistent with the company’s standards and other requirements. This also helps you maintain your company's reputation and brand value.
If you have no clear understanding of what an item is supposed to look like or behave like, then it will be really difficult for you to identify what is a defect in the item and what isn't. When this happens, you can simply check if these products match the specifications listed in the official manuals. If they do not meet all of these specifications, then they are considered as defective items.
Your quality control team will be able to determine which items are good for your inventory and which ones are not by comparing each item with the official specifications. In some instances, a defective item will not only be rejected but also returned to its supplier. When this happens, you would need to keep track of all the defective items in your system so that you can process returns when necessary. Your supplier can then go through the same process again if possible (which is likely) or contact another supplier to produce a replacement item if they are unable to do so themselves.
When it comes to managing your inventory effectively and efficiently, you must use technologies that have been proven through years of use.
There are some technologies that you can use to make your inventory management more efficient. These include:
Some of the benefits of using technological solutions in managing your inventory include:
Since inventory is an important part of your company, you need to make sure that it is following the correct information flow to avoid mistakes and inaccurate information. However, on its own, there is no way for a person or a computer system to know if there are any discrepancies in your data. For example:
There are also things that depend on each other in order to operate correctly. And they will have effects on other departments as well since they will affect their functionalities and outputs. One such example is shipping and receiving. If this function is not properly managed, then your business will be a victim of damaged goods and stock-outs.
This is also one of the reasons why you must consider integrating the entire supply chain of your company if you want to have a complete picture of inventory and order fulfillment.
You must also make sure that there are really good measures in place to ensure that your inventory can be tracked and processed correctly at any time. There are three main steps to follow:
Once you have integrated all parts of the supply chain into your reporting system (inventory management), it is time to start thinking about some strategic moves based on insights about how each part functions in the overall system. This can help you improve areas where there are opportunities for improvement.
Conclusion
The purpose of inventory management is to track, monitor and understand the performance of your inventory. This way, you will be able to improve efficiency, achieve optimal results, and make informed decisions. Each area of your inventory management system plays a vital role as a part of managing your business and you should analyze them all in order to ensure that they are working effectively together. In addition, you must remember that inventory is an important part of managing your business and that it has a huge impact on financial performance. And the more effective you manage it, the more profits you will make with time.
Source: https://www.managementreviews-essay.