Abstract
One of the top priorities that every brand in the contemporary world ought to have is achieving better inventory management as the business grows. It overlooks the efficiency of the supply chain of goods from the point they are released by the manufacturer to the warehouse, and finally to the point of sale. Inventory management is quite a challenge for many organizations, especially if the whole process is poorly planned, executed, and the adopted technologies are not managed properly.
An effective inventory management system should detect, capture, and analyze information about the demand and supply of various products. In inventory management, information technology is a tool that organizations use to enhance efficiency levels and manage costs. Information technology has also affected inventory management about the necessary skill sets for employees. If it is not used expertly, integrating information technology in inventory management can be a hindrance to organizational success.
Introduction
One of the most important elements within any organization is supply chain management. A key component of this element is inventory management, which refers to the organization and supervision of stock items, as well as the value of a firm’s current assets (Turban, Pollard & Wood, 2018). It overlooks the efficiency of the supply chain of goods from the point they are released by the manufacturer to the warehouse, and finally to the point of sale. In inventory management, the most important thing is having a detailed and updated record of both new and existing products as when they leave or return from one point to another.
The complexity and challenges associated with this process are quite similar across all organizations regardless of their portfolio’s size (Waller & Esper, 2014). However, there are slight differences for organizations with adequate physical space compared to those with a limited one because the former will have a receiving area for goods while the former may be forced to send them straight to the stock area. Another notable difference in the way the inventory management process might be applied by different organizations is that wholesale distributors tend to deal with finished products, while manufacturers start by handling raw materials (Arslan, 2017).
Depending on where an organization fits in the supply chain, the efficiency of the process is of paramount importance, thus the need to have effective tools, techniques, and quality measures cannot be easily overlooked.
Discussion
Inventory management is quite a challenge for many organizations, especially if the whole process is poorly planned, executed, and the adopted technologies are not managed properly. The whole process uses an assortment of information about various goods that includes serial numbers, quantity, costs, and dates of moving from one point to another (Turban, Pollard & Wood, 2018). The importance of taking and using this information in supply chain management is the fact that it ensures high customer satisfaction by delivering the right goods, in the ordered quantity, and on time.
In addition, inventory management plays a pivotal role in ensuring that a business reduces the cost of operation and optimizes profitability (Waller & Esper, 2014). This kind of control achieved through inventory management is usually the difference between businesses that maintain high levels of competitiveness for prolonged periods and those that do not.
Methodologies of Inventory Management
To have an effective inventory management process, an organization has to apply several methodologies. One of the commonly used ones in stock review. This involves conducting an analysis of goods at hand versus the need level regularly. Capable of being done manually or using an automated system, this methodology provides an organization with the lowest stock level they should not pass to maintain a good flow of goods (Turban, Pollard & Wood, 2018).
Another effective methodology for inventory management is the Just in Time (JIT) approach that entails releasing goods only ordered by customers. The effectiveness of this strategy is highly dependent on the ability of an organization to conduct a thorough market analysis to establish the buying patterns of potential customers, as well as the supply and demand of goods (Arslan, 2017).
Organizations that have an effective inventory management process also use the ABC analysis strategy. It involves classifying products into three categories, namely A, B, & C. A contains products of high value and low quantities. Category B has products of moderate value and moderate quantity, while C contains goods with low value and high quantity. This model relies a lot on the ability to identify products that have the best sales to have enough stock on standby. One of the notable merits of this model is the fact that it helps an organization to have good control over high-value goods (Waller & Esper, 2014).
For example, items in category A are most likely to be more expensive than the other two, thus no need to have them in large quantities because the probability of them taking a long time to sell is higher. However, the model can prove to be costly in the end for organizations that struggle to make sales because regular analysis of inventory levels for the three categories requires a considerable amount of resources.
Technological Features that have Improved Inventory Management
One of the top priorities that every brand in the contemporary world ought to have is achieving better inventory management as the business grows. Technology has played a major role in many organizations achieving this feat, amid an array of challenges relating to the high rate at which new trends keep emerging. The most effective inventory management technologies have four key features, namely ease of accessibility, scalability, real-time updates, and in-depth reporting (Turban, Pollard & Wood, 2018).
An effective inventory management system should be easily accessible from devices such as laptops, tablets, and mobile phones. This makes it easy for all departments to have good coordination. In addition, it helps employees to be highly productive because one does not have to be stuck in front of a computer running numbers all the time.
An inventory control technology should have scalability, in the sense that a small business can integrate a system that is capable of handling its potential in terms of projected growth. A business does not need to keep changing systems as it grows and diversifies. In-depth reporting is also a key feature of an effective inventory management system. This entails the ability of a system to detect, capture, and analyze information about the demand and supply of various products (Waller & Esper, 2014).
The system should also be in a position to identify products that have gone for long without leaving the warehouse or the point of retail. This helps in making decisions relating to the marketing of such products. Finally, an effective inventory management system should have real-time product updates. This entails providing the latest stock information depending on the rate at which customers order and receives the goods they need (Waller & Esper, 2014). These kinds of updates play a crucial role in ensuring that products are not over or under-stocked.
Use of Technology in Inventory Management
Technology is one of the most vital elements of every business plan in the contemporary world. Regarding supply management, technology has had a noticeable impact on inventory management in terms of its efficiency, accuracy of the information, as well as ease of access to data (Arslan, 2017). This has in turn had a very positive impact on organizational performance because employees are more motivated to give maximum output, the cost of operation lowers, and profit optimization is achieved.
Organizations need to invest in modern inventory systems because they offer a good platform for evaluating risks associated maintain enough stock without investing in more than is required at a particular time (Turban, Pollard & Wood, 2018). Information technology has improved the efficiency of inventory management by tracking the quantity of every product a company has, whereby an order for the additional stock is triggered as soon as the quantities go below the predetermined amount.
This function is necessitated when an organization uses a Point of Sale System (POS), which ensures that once an item has been sold it is removed from the inventory (Pagano & Liotine, 2019). This then creates a closed information loop between all the relevant departments to take the appropriate action.
In inventory management, information technology is a tool that organizations use to enhance efficiency levels and manage costs. Checking and rechecking stock is a never-ending process that requires a high level of commitment in terms of the personnel used and investing in the right technologies. With the high rate of technological advancements and uptake, organizations should ensure that they use the latest technology (Pagano & Liotine, 2019).
Technology has eliminated the manual system of inventory management that was slow and prone to various errors. Good and competent inventory managers agree to the fact that the landscape of their jobs has changed a lot since the integration of information technology in the whole supply management process. Technology has changed the way businesses run their operations and manage various processes. One of the main changes that technology has brought into inventory management the high degree of accuracy of data recorded and shared (Waller & Esper, 2014). This is a big improvement from the manual system where everything had to be done physically, thus leaving room for numerous numerical errors.
An automated system is faster, accurate, more efficient, as well as allows information to be stored and shared with ease (Arslan, 2017). The fact that information technology allows a business to control its inventory continually means that productivity and profitability are highly optimized. This also plays a pivotal role in improving the involvement of employees and other stakeholders in the decision-making process, as information regarding the performance of every department is available. Reliable business decisions are made when managers can conduct insightful analysis of information about an organization’s inventory (Turban, Pollard & Wood, 2018). For example, decisions involving the sale of products depend on the available information detailing the demand and supply of goods in a particular market over a specified period.
Integration of information technology has also affected inventory management about the necessary skill sets for employees. Studies have shown that the complex nature of an automated inventory management system means that employees ought to have the rights skills for it to be of meaningful benefit to an organization (Pagano & Liotine, 2019). Information technology can be a hindrance to success in an organization if it is not used expertly.
This may involve the ability of an organization to diversify and incorporate the concept of e-commerce into its operations. For businesses that have invested in e-commerce, the value of information technology in inventory control is much higher because online retailing compliments the sales made across physical stores. This is made possible by using an integrated inventory control system that tracks the activity of products across all channels of retails in a continuous manner.
Technological advancements and uptake have gained a lot of momentum over the last couple of decades. This has increased the ability of businesses to diversify their portfolios because inventory control is much easier, coupled with the fact that there is a wide range of technologies to choose from depending on the unique needs of a business (Waller & Esper, 2014).
Information technology has also changed inventory management by eliminating the one-size-fits-all attitude that was common with the traditional inventory management techniques. In the contemporary world, manufacturers have the option of using a different inventory management system from the one used by retail and wholesale traders (Pagano & Liotine, 2019). Interestingly, inventory management technologies are designed in a manner that collecting and managing the flow of goods can be done passively or actively.
Passive control of inventory entails an approach where information systems are manually activated depending on the period a manager wants to cover. On the other hand, active control of inventory entails a strategy were detecting, tracking, storing, and analyzing data happens automatically (Waller & Esper, 2014).
Studies have shown that smart technologies such as apps have also made a considerable impact on inventory management strategies adopted by organizations (Pagano & Liotine, 2019). Although they require manual entry of information like the traditional methods, their chances of having errors are much lower and provide a worthwhile option for smaller businesses that may lack the resource pool needed to integrate some of the top inventory management technologies available. However, the most important thing is the fact that a business can use technology to improve the efficiency of its service delivery systems and lower the costs of operation (Turban, Pollard & Wood, 2018). Apps are also beneficial in the sense that they do not require a high investment in personnel like the other types of inventory management technologies.
Conclusion
For any business to achieve prolonged success and competitive advantage, having a good inventory management system is of paramount importance. Information technology has helped businesses to become more efficient and profitable due to a reduction in the number of errors made in managing stock, as well as empowering employees to give maximum output. Inventory management technologies such as barcode scanners have eliminated manual processes in many retail and wholesale businesses that have created time for employees to focus on other tasks within the workplace.
There is an urgent need for businesses in the contemporary world to integrate information technology in managing their inventory because it has proved to have a positive impact on increasing profitability and enhancing the efficiency of service delivery.
References
Arslan, M. (2017). The role of information technology in inventory management: A study of the logistics sector of Pakistan. New York, NY: GRIN Verlag.
Pagano, A, M., & Liotine, M. (2019). Technology in supply chain management and logistics: Current practice and future applications. New York, NY: Elsevier.
Turban, E., Pollard, C., & Wood, G. (2018). Information technology for management: On-demand strategies for performance, growth, and sustainability. New York, NY: John Wiley & Sons.
Waller, M.A., & Esper, T.L. (2014). The definitive guide to inventory management: Principles and strategies for the efficient flow of inventory across the supply chain. New York, NY: Pearson Education Incorporated.