6 Business Benefits of Efficient Inventory Management in 2024
With the COVID-induced supply chain crisis, an efficient inventory management system has taken on greater importance than before. When we think of inventory management, the first thing we think of efficiently managing the warehouse’s forklifts.
But Inventory management, by itself, is an umbrella term housing different sub-processes within it, such as:
- Sales forecasting
- Product ordering
- Supply chain management
- Warehouse management
- Order fulfillment
If done right, efficient inventory management helps companies in:
- Increasing customer satisfaction
- Estimating an accurate cash flow in the short and long term
- Forecasting sales
- Improving operational efficiency
- Managing multiple warehouses simultaneously and remotely
- Automating reorders and restocks
In this article, we plan to explain how automating your inventory management systems can help you achieve these benefits.
1. Increase customer satisfaction
Automated inventory management solutions holistically streamline order receiving, processing, and shipping. This means from the moment the customer places an order, a step-by-step process gets underway to ensure that the fulfillment is done as quickly as possible:
- Order data is transported to inventory management software
- Inventory lookup is done to ensure the good is in stock
- Invoice is issued
- The shipping timeline is established
- Payment is processed
- Good is shipped out
The automatic undertaking of these steps means the company’s manpower can spend their time more efficiently on more value-driven tasks.
2. Improve cash flow
A part of inventory management is making sure payments are paid and received on time. On the production side, this ensures that vendors are paid when they should be paid, which means they ship the intermediary goods on time. On the selling side, receiving collectibles quickly and efficiently from customers means orders can be processed and shipped out quicker.
If vendors are paid on time, this means production can continue as scheduled. This would channel down to the finished article being released on the market as intended, which will then result in revenue coming in sooner.
3. Sales forecasting
The data that flows from a business’s different ERP and CRM systems, such as sales orders, order processes, and shipments can automatically be gathered to create metrics for data-driven decision making in the following months.
This means a business can forecast how many sales it will have in January by comparing the YoY (year on year) numbers with last year. Or it could calculate the seasonal effects of order congestion to estimate how long shipments would take to get out the door.
If done manually, the gathering and analysis of these numbers can be error-prone and time-consuming. But if done automatically, they will take less time to be processed with more accuracy and efficiency.
4. Improve operational efficiency
By leveraging IoT, businesses can get an accurate insight into how effective their machinery equipment is functioning. For instance, by keeping track of the machine’s temperature or liquid levels, the staff could undertake predictive maintenance before any long-lasting damage is caused. This will reduce downtime and ensure process continuity.
Or through the use of process mining, companies can identify bottlenecks and pain points that are causing the warehouse processes to slow down. For instance, they might find out that the biggest time gaps happen between when an order is placed and when the inventory is confirmed for that good. This gives them the opportunity to troubleshoot.
Explore more on how process mining can improve supply chain business.
5. Manage remotely
With software solutions housing the relevant data, warehouses can be managed remotely. This has two implications:
- With companies operating their warehouses in different geographical locations, a cloud-based inventory management software makes it easy for managers to keep an eye on multiple locations simultaneously without being physically present at the location
- Round-the-clock, internal monitoring is made possible to ensure operational continuity
6. Automate reorders
Shelves can be tagged with RFID tags that will keep track of how many products are on them. These tags can then be programmed to be connected to inventory management software that will place reorders automatically when the stock is low. The benefit is that the waiting time for restocks to arrive will be minimized if it’s done in advance. This is especially important for companies that operate on the “just-in-time” principle, which dictates inventories should arrive on-site exactly before they are assembled together to create a finished product.
For more on supply chain and logistics
To learn more about the use cases of automating supply chain and logistics, read:
- 4 Ways to Improve Your Food Supply Chain
- Top 4 Logistics Trends to Watch Out for in 2022 & Beyond
- 3 Ways To Optimize Your Supply Chain
And if you are looking to automate to supply chain processes, head over to our Supply Chain & Logistics hub, where you’ll find data-driven lists of vendors for various use cases.
We will help you choose the best tool for your business:
Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 60% of Fortune 500 every month.
Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.
Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised businesses on their enterprise software, automation, cloud, AI / ML and other technology related decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.
He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.
Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.
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