Here’s Everything You Need To Know About Enterprise Inventory Management

What Is Enterprise Inventory Management?

At the enterprise level, inventory management is the process of overseeing a company’s inventory levels. This includes ordering, storing, using and selling products. It is about having the right amount of stock in the right place at the right time. Effective inventory management helps businesses avoid stockouts and surpluses, which can hurt their bottom line.

Unlike smaller-scale businesses, enterprise inventory management involves handling large volumes, diverse product ranges, complex global supply chain demands and compliance requirements.

What Kind Of Inventories Do Enterprises Typically Maintain?

Tangible Goods:

• Stock Inventory:  For enterprises, managing stock becomes challenging due to potentially vast quantities spread across multiple warehouses, locations or franchises.
• Raw Materials & Components: Enterprises, especially those in manufacturing, also maintain inventories of base materials needed for production for example wood for furniture and metal for cars.
• Internal-Use Assets: These are essential for daily operations and come in various forms like IT equipment (laptops, servers), tooling and machinery, company vehicles and more.

How Can Enterprises Effectively Manage Inventory Levels Across Geographically Dispersed Warehouses & Distribution Centres?

Managing inventory across geographically dispersed warehouses and distribution centres adds complexity to the inventory management process but can also offer significant benefits. The following is an overview of how enterprises can handle this challenge:

• Centralised Inventory Management System: Implement a robust inventory management system (IMS) that provides a real-time view of inventory levels across all locations. This allows for centralised control and visibility into stock availability.
• Strategic Warehouse Placement: Analyse demand patterns and strategically locate warehouses or distribution centres closer to major customer concentrations.
• Demand Forecasting & Safety Stock: Utilise advanced demand forecasting tools that consider regional variations in demand.
• Inventory Allocation & Replenishment Strategies: Develop an allocation strategy to distribute inventory across warehouses based on anticipated regional demand.
• Warehouse Automation & Standardisation: Invest in warehouse automation solutions to improve efficiency and accuracy. Standardise processes across all locations to streamline inventory management.
• Transportation Management: Optimise transportation routes and carrier selection to minimise shipping costs and delivery times.
• Vendor Management: Maintain strong relationships with vendors and negotiate favourable terms that consider geographically dispersed deliveries.

What Is The Relationship Between Inventory Management And Gross Margin?

• Inventory Costs: Holding inventory involves costs like storage, insurance, and potential obsolescence. Inefficient inventory management can lead to excessive inventory, which ties up capital and reduces profits.
• Sales & Profitability: Effective inventory management ensures businesses have enough stock to meet customer demand without overstocking. This helps businesses sell more products and maximise their profit per sale, ultimately improving their gross margin.
• Inventory Turnover: Inventory turnover measures how many times a business sells and replaces its inventory within a period. Strong inventory management practices lead to a higher inventory turnover, freeing up capital for other uses and allowing companies to negotiate better deals with suppliers due to higher order volumes, further improving gross margin.

What Are The Different Types Of Inventory?

There are four inventory types that businesses typically track:

• Raw Materials: These are the base materials used to produce finished goods. For example, a furniture maker would consider wood, fabric, and nails as raw materials.
• Work-In-Process (WIP): These are items still in production and haven’t become finished goods. For instance, the furniture maker would consider a partially assembled chair work in process.
• Finished Goods: These are products that are ready for sale to customers. In the furniture example, this would be fully assembled chairs and tables.
• Maintenance, Repair, Operations (MRO): These are supplies needed to keep a business running smoothly such as cleaning products, light bulbs, and tools.

How Can Enterprises Adapt Their Inventory Management Strategies To The Demands Of Ecommerce Fulfilment?

Ecommerce fulfilment presents unique challenges for inventory management compared to traditional brick-and-mortar businesses. The following is how enterprises can adapt their strategies to meet these demands:

• Leverage Data For Smarter Decisions: Utilise ecommerce data for accurate demand forecasting, real-time inventory visibility, and integration with ecommerce platforms.
• Optimise Fulfilment Operations: Strategically place warehouses, distribute inventory across locations, and explore dropshipping for specific products.
• Focus On Efficiency & Accuracy: Implement warehouse automation, optimise warehouse layout, and prioritise inventory control for high-demand items.
• Maintain Flexibility & Scalability: Choose a scalable inventory management system and be prepared to adapt strategies based on real-time data.

Which Tools Can Enterprises Use For Inventory Management?

Inventory management software is a powerful tool that can automate many tasks and streamline inventory operations. The following are some of the common tools used for inventory management:

• Barcode And Mobile Systems: Barcoding assigns a unique identifier to each item, allowing businesses to track inventory levels through scanning with mobile devices.
• Reorder Alerts: Software can set automatic reorder points based on historical sales data and lead times.
• Reports & Dashboards: Inventory management software generates reports that provide insights into stock levels, sales trends, and supplier performance.
• System Integration: Inventory management software can integrate with other business systems like accounting, ecommerce platforms and CRM software. This creates a seamless flow of information and eliminates the need for manual data entry across different systems.