To maintain regular production and supply, businesses must always monitor and manage inventory accurately and thoroughly. However, each business has a different way of managing inventory, depending on the company's goals and business lines. Join Citek to learn the following 9 inventory management strategies to improve your business's operating processes in 2024!
To maintain regular production and supply, businesses must always monitor and manage inventory accurately and thoroughly. However, each business has a different way of managing inventory, depending on the company's goals and business lines. Join Citek to learn the following 9 inventory management strategies to improve business operating processes in 2024!
9 inventory management strategies businesses must know in 2024!
9 inventory management strategies
1. Just-in-time (JIT) inventory management
Meaning that the manufacturer only needs to have enough inventory to produce exactly what is needed, meeting customer needs. This lean strategy helps reduce production and inventory management costs. However, the JIT strategy requires the manufacturer Exporters must work with reputable and highly responsible partners to ensure the supply chain. Otherwise, disruption of the supply chain will lead to disruption of the flow of goods.
2. First in, first out (FIFO)
With this strategy, the inventory that is entered first will be sold or used first. Method FIFO is often applied to products with a certain shelf life, for example batteries or medicines.
With a FIFO strategy, the inventory that is entered first will be sold or used first
3. Last in, first out (LIFO)
Strategy LIFO left The opposite of FIFO - new products entering the warehouse are used first. Businesses choose this strategy because they believe that new goods will be more valuable than old goods. Therefore, businesses will recover capital faster.
The main benefit of the LIFO method is to minimize tax costs under inflationary conditions. When commodity prices increase, the cost of goods sold (COGS) calculated using the LIFO method will be higher than COGS using the FIFO method. This will reduce the short-term profits of the business. Since then, the income tax that businesses must pay has also decreased.
Strategy LIFO is the exact opposite of FIFO
4. Economic order quantity (EOQ)
Strategy EOQ helps manufacturers determine the ideal order volume for each imported product so they don't have to keep too much or too little inventory. This method uses data on annual demand, ordering costs (including discounts if applicable), and annual holding costs to calculate the amount of inventory to order at the lowest total cost. The EOQ strategy is especially useful for manufacturers with stable inventory needs.
EOQ strategy helps manufacturers avoid having to hold too much or too little inventory
5. Weighted average cost (WAC) method
Instead of calculating the cost of each unit of inventory, the WAC calculates the average cost of all inventory. This method allocates costs across the entire inventory, helping to prevent large fluctuations in the price of each specific item. Calculating inventory value using a weighted average strategy will minimize the impact of cost fluctuations on the product pricing process, thereby keeping prices stable.
6. Cycle counting
Cycle counting is used to ensure the actual inventory count matches the manufacturer's inventory data. This method focuses on counting inventory periodically (possibly weekly, monthly, even daily) and adjusting data if there are discrepancies.
Cycle counting is used to ensure the actual inventory quantity matches the manufacturer's inventory data
7. ABC classification
ABC classification is a classification method inventory is based on the item's importance to the manufacturer, as determined by demand, cost, and risk. This technique divides inventory into “A”, “B” and “C” groups. In particular, goods in group "A" are considered the most important and are given priority over groups "B" and "C" when manufacturers decide which items to stock, in what quantity and when. re-order. This method also supports the cycle couting process, helping businesses focus on important product groups to avoid the risk of loss or errors.
Class A goods are the highest priority goods in the ABC classification method
8. Manage consignment inventory
With this method, the consignor (manufacturer) will provide goods to the consignee (distributor, retailer,...). The consignee will own and maintain this inventory, but will not be required to pay any amount at the time of delivery. Only when the goods are sold does the consignee pay the consignor. This method helps reduce the manufacturer's inventory costs.
Consignment inventory management benefits both manufacturers and distributors, retailers,...
9. Inventory management thanks to cloud technology
This management strategy uses technology to support the above eight strategies, through a centralized, accessible inventory management system (IMS). Access 24/7. Specifically, the IMS system using cloud computing can automatically track inventory in real time. This helps ensure manufacturers always have enough inventory to meet customer demand, while also notifying businesses when inventory levels drop below certain thresholds. The system is also capable of calculating EOQ and WAC, in addition to forecasting product demand and supporting the process of working with suppliers.
Cloud technology is a trend in inventory management
Manage inventory easily with Oracle NetSuite
Management Module hNetSuite's inventory helps businesses easily optimize inventory levels, boost profits and reduce cost of goods sold. The system allows manufacturers to track inventory anywhere, support decision making and reallocate stock when necessary. Besides, the system also helps identify fluctuations in customer demand, based on the business's sales history. The system also has the ability to accurately track inventory through batch and serial tracking, helping to determine appropriate management strategies and reduce waste.
Oracle NetSuite is a comprehensive, innovative solution for business administration activities
NetSuite's Inventory Management features will help businesses improve performance and save time and costs on inventory management. At the same time, manufacturers also avoid shortages or excess inventory, helping to meet customer expectations effectively.
Read more: Is Oracle NetSuite the Right ERP Solution for Your Business?
Conclusion
In the Manufacturing or Distribution/Retail industry, inventory management is very important. Because a small mistake can affect the entire supply chain. The above 9 inventory management strategies will be an important link to help businesses improve operations and grow sustainably in 2024!
Citek - Reputable Oracle NetSuite ERP implementation partner in Vietnam
Citek is a consulting business implementing a comprehensive set of digital transformation solutions ERP Oracle NetSuite & SAP for medium and large businesses with solutions specialized fields such as MES, Data Collection, CRM, Data Warehouse, Business Planning, Business Intelligence,...
Citek has gained the trust of more than 100 domestic and foreign companies such as: Hoa Phat Group, Gelex Group, Loc Troi Group, Eurowindow, THP Group , Adidas, Phenikaa, Nanogen Pharmaceutical, Cadivi, Thibidi, Honda Vietnam, Minh Phu Seafood, Nippon Paint, Ton Nam Kim, SMC Steel, Diana, Big C, Novaland, Mitsubishi Electric, Vipep, Vietnam Industrial Park,...< /p>
Citek is a reputable Oracle NetSuite implementation consulting unit in Vietnam
With important contributions in the field of Digital Transformation, recently, Citek was honored at the Ho Chi Minh City Gold Brand Award 2023, Award Top 10 Vietnamese IT Enterprises 2021, Sao Khue Award 2021 ;and Vietnam Gold Star Award 2021. In addition, Citek is also the only partner in Vietnam honored by SAP SAP S/4HANA Partner of The Year 2020, the fastest growing partner of SAP in Asia Asia Pacific 2019.
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