In manufacturing, inventory management is critical.
Tracking and managing the movement of raw materials, work-in-process goods, and finished goods ensures they remain available in the right quantity and quality when needed.
It’s a complex process, and specialized software solutions are key in bringing your manufacturing inventory management to the next level.
This guide provides an overview of manufacturing inventory management best practices for 2023 as well as advice on how to choose the right software for your manufacturing business.
Let’s dive in.
What is manufacturing inventory?
Manufacturing inventory is the collection of raw materials, components, semi-finished products, and finished products that a manufacturing company has on hand.
It’s important to closely track manufacturing inventory in order to ensure that your business can continue without interruption.
What types of inventory does a manufacturer have?Manufacturing inventory typically includes raw materials, supplies, and components used in manufacturing processes. These can range from basic manufacturing inputs such as fuel, power, and lubricants to more specialized items like electronic parts, plastic molding components, and fabricated metal parts.
Additionally, manufacturing inventory needs to account for finished goods or products that are being stored prior to shipping. Keeping track of these items ensures manufacturers have enough stock on hand when customers place orders.
Raw materials are the basic components used in manufacturing processes, such as metals, plastics, wood, and other resources.
These are the components that are created during manufacturing processes, such as nuts, bolts, screws, and other hardware.
These are the items that have been completed from raw materials through the manufacturing process and are ready for sale.
These are materials used to package and protect finished products, such as boxes, bags, shrink wrap, and other shipping materials.
Why is manufacturing inventory management important?
Effective manufacturing inventory management ensures that processes remain efficient and affordable.
Proper tracking of inventory helps minimize waste related to overstocking or understocking, as well as reduce delays due to out-of-stock items or production line stoppages because of missing components.
Inefficient inventory management can also lead to losses due to spoilage or theft if you don’t properly implement controls.
Key benefits of efficient inventory management in the manufacturing industry
Streamlined inventory management offers a variety of important benefits.
1. Optimize manufacturing processes
Proper inventory management helps businesses identify and plug any gaps in their production process for a more efficient manufacturing cycle.
2. Ensure reliable customer service
Having the right stock levels can ensure that manufacturing businesses meet customer demand with timely deliveries and quality products.
3. Avoid costly ordering mistakes
With accurate stock levels, businesses can also reduce their ordering costs by avoiding the risk of overstocking or understocking.
4. Analyze business performance
Knowing exactly where inventory is and what’s been ordered provides insights into operational performance and customer behavior, so businesses can identify areas for improvement.
5. Enhance the customer experience
With the right inventory levels and processes, manufacturing businesses can ensure a top-notch customer experience.
6. Streamline operations & increase profitability
By reducing waste and optimizing production cycles, businesses can improve their bottom line.
7. Anticipate demand trends
With visibility into their inventory and the right analytics, manufacturing businesses can anticipate future customer demand and prepare for market shifts.
8. Increase safety and accuracy
Proper inventory control helps manufacturing businesses avoid dangerous workplace accidents, as well as inaccurate product deliveries due to incorrect data entry or documentation errors.
9. Leverage data-driven insights
With manufacturing inventory software, manufacturing businesses can gain access to up-to-date analytics to inform decisions and benchmark performance.
Manufacturing inventory management best practices
Using these best practices will help ensure that a manufacturing organization has the right amount of stock on hand at all times and is able to respond quickly to customer orders.
By taking these steps, manufacturers can ensure that they are well-positioned for success in the years ahead.
1. Establish an inventory control system
An inventory control system should encompass the processes and procedures needed to track manufacturing inventory from procurement through manufacturing and eventual sale or disposal of the product. This includes all relevant activities such as order processing, receiving raw materials, tracking production progress, issuing finished products for sale or delivery, and conducting periodic physical inventory counts.
2. Understand your demand patterns
It is important to analyze manufacturing supply chain data to identify any seasonality or other fluctuations in customer demand that could influence manufacturing inventory levels.
Accurate forecasting of future demand will help inform decisions around inventory management and ensure that sufficient quantities are available when needed without incurring excessive costs due to overstocking or waste from spoilage.
3. Leverage inventory management software
Manufacturers should consider investing in an inventory management system that can automate many of the tasks related to managing inventory, including ordering, tracking, reordering, and replenishment. This improves accuracy and reduces losses due to waste or theft.
This software can provide real-time visibility into stock levels and integrate easily with other systems (e.g. MRP systems).
Inventory software, like SkuVault, can also provide analytics and insights into manufacturing processes that can be used to make more informed decisions.
4. Implement Just-in-Time manufacturing processesJust-in-Time (JIT) manufacturing is a production model that reduces waste and streamlines operations by only producing inventory as needed. By eliminating excess inventory, you can save money and optimize efficiency without sacrificing quality or making customers wait for their orders.
5. Monitor inventory levels closely
Having too little inventory can lead to delays in production while having too much can mean wasted resources and money. Monitoring your manufacturing inventory levels helps you know when it’s time to reorder supplies or reduce production.
6. Automate the manufacturing process
Automation of manufacturing processes is becoming more common as technology improves. By using automation, you can keep track of supply and demand more efficiently. This automation can also reduce the need for physical storage space as well as mistakes due to human error.
7. Perform regular cycle countsCycle counting is the practice of regularly monitoring manufacturing inventory levels so adjustments can be made in a timely manner when needed. This helps you stay on top of manufacturing inventory levels, prevent wastage, and identify areas of inefficiency.
8. Create manufacturing inventory reports
Regular manufacturing inventory reports can help you understand the flow of materials through your manufacturing process and identify potential problems or areas of inefficiency. These reports are generally available through your inventory control software and can help you understand your current stock levels, so you can adjust production accordingly.
What is manufacturing inventory management software?
Manufacturing inventory management software (also called a manufacturing inventory management system) is a type of application designed to help manufacturers better manage their stock.
Inventory management systems can automate key processes and provide real-time information on stock levels, delivery times, reorder points, supplier performance, and more.
The right inventory management system enables manufacturers to track inventory across multiple sites or warehouses, reconcile orders against actual deliveries and set up automated alerts when stock needs to be replenished. With this software, manufacturers can ensure that they have the right parts available in the supply chain while avoiding costly overstocks.
Tips for effective manufacturing inventory management
1. Use barcoding
Use barcoding to track manufacturing inventory more efficiently. Scanning the code one ach item in stock is an easy way to identify and track inventory.
2. Adopt an easy-to-use inventory software
Use a manufacturing inventory system that can easily be updated with new information. An effective manufacturing inventory system should have the ability to quickly and accurately update information across the supply chain as it becomes available, such as when manufacturing orders are placed or completed.
3. Use automation
Automate manufacturing inventory tracking where possible. Automation can save time and money by automating certain manufacturing inventory tasks such as order fulfillment or stock replenishment.
4. Analyze trends
Analyze manufacturing inventory trends to anticipate needs and plan accordingly. By monitoring trends, production teams can better anticipate future manufacturing needs and plan accordingly to ensure the necessary resources are in place.
5. Tailor your system to the production team’s needs
A well-designed manufacturing inventory system should be tailored to the specific needs of the production team, including tracking manufacturing inventory levels and usage.
6. Stay informed with inventory reports
Use manufacturing inventory reports to stay informed on inventory levels. These reports can help keep production teams informed on stock levels, enabling them to make necessary adjustments as needed.
7. Use real-time inventory dashboards
Use inventory status dashboards to easily monitor manufacturing inventory levels. Dashboards can help keep manufacturing teams informed on manufacturing inventory levels in real time.
8. Utilize predictive analytics
Use predictive analytics to anticipate future manufacturing needs and plan accordingly. Predictive analytics can help production teams anticipate manufacturing needs more accurately and plan accordingly.
9. Implement regular training
Develop regular training for manufacturing teams on inventory best practices. Regular training can ensure teams are using the most up-to-date and efficient methods to manage inventory.
10. Use mobile inventory apps
With accurate inventory in your backpocket, you can easily track inventory levels on the go and away from your desks, so you’re always informed and up to date.
By understanding what manufacturing inventory is and the types of inventory that manufacturers have, you can ensure that your business is as efficient and effective as possible.
There are a few best practices that you should keep in mind, such as regular stocktaking, maintaining accurate records, setting reorder points custom-tailored to your business needs, and investing in manufacturing inventory management software.
There are several key benefits to this software in the manufacturing industry, including increased accuracy, reduced costs, and improved customer satisfaction.