June 16this Fresh Veggie Day and we are still thinking all about food here at the SBDC! Although, we are thinking about it in a totally different way. This time we’re talking inventory management. Inventory management can be defined as process of ordering, storing and using a company’s inventory: raw materials, components and finished products, according to Investopedia. Inventory is a valuable asset that is at the core of the business, and it is definitely an area in which things can go wrong. Since it is Fresh Veggie Day this week, let’s take that as an example… as a restaurant with fresh products as inventory you cannot order too much at a time, as it will go bad and you will not be able to sell it. Thus, resulting in lost product and money. How do you handle inventory management, you may ask? Read along for more information on how to tackle inventory management with ease.
First, it is important to understand the types of inventory. As mentioned above there are raw materials (such as fresh veggies used to make a salad), work in progress (such as a chair being made to then be sold), and finished goods (such as a piece of clothing sold as is). The most common types of inventory accounting systems include the periodic system and the perpetual system. The periodic system uses physical counting to measure the level of inventory and cost of goods sold; while, perpetual system constantly keeps track of inventory balances and cost of goods sold with automatic updates. Next, two major strategies in planning inventory management include just-in-time (JIT) inventory and materials requirement planning (MRP) inventory management. The JIT method can be described as keeping only the inventory needed to produce and sell products. The MRP method forecasts inventory needs based upon accurate sales records that allow for planned ordering. By defining what works best for your business you are on the right track in keeping inventory management under control. From this point on it is important that you keep records and stay organized; you want to follow through with everything and make sure things are getting re-ordered when necessary. There are many different types of tools and software that make this whole portion of the business easier to handle, so take the time to look into the options that are out there. For more information on this topic, check out the tips Square, Inc.gives for how to manage small business inventory.
These are just some of the components in inventory management and it is a topic that can get quite complex and confusing! If inventory management is something that becomes overwhelming, the University of Scranton Small Business Development Center can assist you. Whether it is determining what strategy to use or what software, we are happy to help! Visit our website, www.scrantonsbdc.com, to sign up for consulting!
The University of Scranton
Small Business Development Center
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