What are the requirements for effective inventory management system?
Answers
Determining inventory level in hand and sent outside for an order.
Accurate Estimation of inventory demand keeping scope for errors and unforeseen events.
Lead time and variability related information should be available.
Complete data on holding, ordering and shortage costs.
Clear and well defined inventory with seperate groups for seperate goods classified according to use.
An effective Inventory Management System (IMS) ensures that optimum inventories of goods are maintained in a warehouse, to meet market requirements.
The most important requirement for a successful IMS is the forecasting system used. All seasonal factors and market fluctuation trends should be taken into consideration while forecasting. Lead times, variability percentage, inventory classification, re-order point and other market factors if calculated and factored correctly, helps to run an effective forecasting system.
An effective warehousing system following First-In-First-Out (FIFO) or First-Expiry-First-Out (FEFO) principle (as appropriate for the goods stored), ensures that stocks do not sit idle and expire in the warehouse.