Let’s say you’re running a manufacturing business, and you’ve currently got so much raw material on hand that it’s taking up space on your shop floor and slowing down the production process. To solve this problem, you might opt to use a JIT inventory management technique, like the Kanban system.
In a Kanban system, you’d attach a card (either physically or digitally) to every component or raw unit. Once the component is used to complete a finished product, the card is removed and sent back up the production line. These cards are collected, then used to trigger a replenishment order—just for the number of components or amount of raw material you’ve used.
The goal would then be to time your production rates and forecast demand so you receive your replenishment order just in time to avoid a stockout. Following this pattern on an ongoing basis ensures you don’t have to store more components than you actually need.
Inventory management systems help you avoid overbuying products that don’t sell. Inventory management can also help you keep inventory costs low—which is important since high storage fees, shipping fees, and manufacturing fees can all eat into your profit margins.
Believe it or not, good management solutions can also enhance your customer service, since they help you keep product in stock, improve your customer order fulfillment, and track sales across multiple channels.
Most importantly, though, inventory management makes your life easier in general. It can help you organize your warehouse, track inventory movement across multiple locations, and even integrate with your other business solutions (like your point-of-sale or accounting software).
Overall, inventory management is an excellent strategy for any business that sells physical goods.