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The Importance of Inventory Management

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Image by Pete Ashton via Flickr

One of the most important aspects of any business is inventory management. Those who have never worked in the business sector may not understand the importance of efficient inventory management.

But, the reality of it is if you don't have control of your inventory, you will be unable to ascertain you will have enough inventory on hand to handle the needs of your customers. Even worse than that--you will not have enough supplies on hand to produce the products you need to meet the needs of your customers.

It is important to keep in mind there are several different functions of inventory management: raw inventory, meaning the raw goods the company must keep on hand for production; work in progress inventory which includes any of the goods that are in the production process; and finished goods inventory or the products that are ready to ship to customers.

Without inventory management it would be difficult for any company to maintain control and be able to handle the needs of their customers. Whether you use a fulfillment company or ship products yourself you need to know where your inventory is and where it's going.  Unless you can meet the needs of your customers you will soon lose all of them to competitors who are able to meet their requirements, no matter how stringent.

While inventory management has always been important, it has become more important over the past several decades. As the needs of companies increase, they must in turn increase demands on their suppliers. In order for suppliers to have the goods their customers need, it is necessary for them to maintain excellent and accurate inventory management.

The customers don't care if you have to manually count your inventory or have access to an automated system like the ones that fulfillment centers provide, the only thing that is of concern to customers is the ability of your company to have supplies on hand to take care of their needs in a reasonable amount of time. When you are preparing to open a business you need to look at inventory management as part of your preliminary plans.

Before you even have customers you will need to plan for the maintenance of proper inventory levels. You will also need to maintain a system for increasing those levels as business dictates, and this requires the implementation of efficient and effective inventory management procedures. Without procedures in place to oversee inventory levels it will be quite easy to allow inventory levels to diminish to dangerous levels, levels that will prevent your company from meeting the supply and demand needs of your customers.