Managing inventory well is hard enough, but what makes it harder in the long run is the bottleneck caused by the absence of critical parameters. Here are the most important inventory metrics that manufacturers need to be aware of :
- Product quantification: When quantifying the product to be used in the inventory, it’s recommended to follow a unified approach. This means the same units of measurement be used for the product across different inventories and packaging formats. The benefit of doing so is twofold: It helps end-users make comparisons quickly and easily—simplifying the decision-making process—and helps you do inventory valuations better.
- Packaging mapping: Although manufacturers are free to adopt any packaging scheme, it is much better if the product number and packaging size have a clear mapping. For instance, the product with code P050 can be packaged in sizes of 50 units each. The immediate benefits are smoother invoicing and procuring, while the long-term benefit is a more efficient inventory planning.
- Managing lots: Lot management is critical if the inventory is to be tracked efficiently. This means that a good lot management system should be able to differentiate among the types of products, their respective stages (raw, unfinished, finished, etc.), various important dates (procurement, storage, etc.), and more. This also helps the customer work out the costing easily.
- Product grade: Depending on which part of the supply chain the product is in, it is likely to have different grades. Some examples are level of quality (reflected in Grade I, Grade II, etc.), status (production, testing, etc.), and so on. Most ERP solutions do not factor in this extra layer of complexity, resulting in poor transaction management across inventories.
- Potency calculations: The last but equally important factor in managing inventory is potency, sometimes also known as concentration. The need for this indicator arises because not all inventory is usable by the user or the manufacturer, as a result of which the effective amount of product being purchased is always lesser. A good inventory system needs to factor this in.
So there we have it. Inventory management requires a closer inspection of the processes involved, based on which flexible systems have to be designed. The quest ends only with a capable ERP system that is both extensive and flexible.