Just how important is it to have an inventory software system that can track a company’s costs of receiving, storing and shipping inventory? Well, if reducing inventory support costs are important, then it’s a pretty fair assumption that having an asset tracking solution is of vital importance to managing a company’s inventory.
Unfortunately, a number of smaller enterprise owners believe that stock control software is the domain of the large chain stores and multinationals. They believe it involves a significant investment of both time and money. However, there are a number of simple wireless and cordless barcode scanner systems.
They emphasize ease-of-use, are low cost, and provide the kind of real-time inventory tracking solutions that are such a vital aspect of properly managing inventory. How can smaller enterprises justify the investment of time and money in an inventory software solution?
One of the best ways to justify the investment in an asset tracking system is to take the time to determine the company’s monthly inventory support costs. This would involve accounting for inventory damage, inventory obsolescence, calculating its financing costs to purchase inventory, and warehousing costs such as rent and electricity.
Other costs include employee salaries, the cost of freight to ship and receive parts, as well as tracking any instances of out-of-stock situations. It all sounds pretty involved, and it is. It’s ultimately the reason why inventory management is a going concern for all businesses, regardless of size.
For the smaller enterprise, an argument can easily be made that these aforementioned costs are worse because of the fact that smaller enterprises try to manage and reconcile inventory with manual processes. A favorite tactic is to use excel spreadsheets. Unfortunately, manual inventory approaches, like excel sheets, are problematic at best and at worst, a reason why inventory is so costly to begin with.
Since manual processes aren’t live and for inventory to be properly managed, procurement and inventory professionals must have a life system that tracks inventory in real-time. Changes made in one area must immediately be captured in another. Since manual processes are only updated when someone has the time to update them, capturing vital information about inventory, and its costs, is an exercise in futility and likely why damage & obsolescence is such a huge cost for smaller enterprises.
When looking to justify the cost of investing in that inventory control software, focus in on the company’s financing costs and how much time is spent trying to reconcile inventory with manual processes. How often does the company come across inventory damage? What are the company’s costs of inventory obsolescence? How often does the company purchase too much or too little inventory?
More questions include such things as how often does the company have to pay for expedite fees to rush parts and material into the warehouse because nobody knew inventory levels were so low? Properly answering these questions will provide small enterprises with the ammunition they need to support the investment. It’s all about identifying the costs of inventory in a user-friendly and super efficient manner.
