{"id":2094,"date":"2020-07-27T15:15:10","date_gmt":"2020-07-27T07:15:10","guid":{"rendered":"https:\/\/www.boxful.com\/blog\/?p=2082"},"modified":"2020-08-17T14:32:18","modified_gmt":"2020-08-17T06:32:18","slug":"guide-inventory-management-resource-optimization","status":"publish","type":"post","link":"https:\/\/www.boxful.com\/blog\/en\/guide-inventory-management-resource-optimization\/","title":{"rendered":"A Guide to Inventory Management and Resource Optimization"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Inventory management is a specialist subject. It\u2019s not easy to determine an optimal inventory level \u2013 businesses need to increase their inventory in response to seasonal demands or price increases in raw materials. On the other hand, the stock of certain commodities may need to be reduced due to changes in consumer preferences. There are many factors influencing inventory levels with the devil being in the details. The quality of inventory management may well affect your sales performance. Therefore, whether your business is in manufacturing, retail or e-commerce, it is extremely important to understand the concept of inventory management.<\/span><\/p>\n<h2><b><!--more--><\/b><\/h2>\n<h3><span style=\"color: #00c4b3;\"><b>Definition of an inventory and its purposes<\/b><\/span><\/h3>\n<p><b><\/b><span style=\"font-weight: 400;\">Inventory is the goods and materials that a business holds in a warehouse. Through an inventory system, businesses can monitor and maintain their inventory level. Bear in mind that an inventory level that is too low or too high will result in the ineffective resource allocation leading to a rise in inventory cost.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><br \/>\n<\/span><b><\/b><\/p>\n<h3><span style=\"color: #00c4b3;\"><b>An inventory has two main purposes<\/b><\/span><\/h3>\n<p><b>Responds to real-time demand:<\/b><span style=\"font-weight: 400;\"> As production volume or shipment quantity varies daily, inventory acts as a buffer to fluctuations. If a certain amount of goods are well-stocked, businesses can successfully fulfill any unexpected customer orders without sacrificing potential revenue.&nbsp;<\/span><\/p>\n<p><b>Bulk purchase discounts:<\/b><span style=\"font-weight: 400;\"> Businesses often place larger orders with upstream suppliers in order to get better prices or discounts. The excess is stored as inventory, giving businesses the flexibility to defer buying when prices are high.&nbsp;<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">&nbsp;<\/span><\/h2>\n<h3><span style=\"color: #00c4b3;\"><b>Inventory systems can determine the optimal time to reorder<\/b><\/span><\/h3>\n<p><b><\/b><span style=\"font-weight: 400;\">Carrying too little stock increases the risk of being unable to fulfill customer orders and slows down your long-term business growth; meanwhile, carrying excessive inventory contributes to high carrying costs. To reduce unnecessary costs for your business, the following two methods of inventory management will help monitor your inventory levels and determine the right time to reorder.<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\"><b>Continuous review system:<\/b><span style=\"font-weight: 400;\"> a system where the stock level is updated in real-time. The system will automatically restock when the inventory level falls below a particular reorder point.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\"><b>Periodic review system:<\/b><span style=\"font-weight: 400;\"> a classic inventory system where the inventory level is reviewed at a regular time interval (e.g. once a month). After that, a decision is made on how much stock should be reordered to bring the inventory level up to a given amount.<\/span><\/li>\n<\/ul>\n<h2><b><br \/>\n<\/b><b><\/b><\/h2>\n<h3><span style=\"color: #00c4b3;\"><b>Control inventory costs with better inventory management<\/b><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">In order to reduce inventory costs, first you\u2019ll need to analyse where the various expenses are being generated:<\/span><\/p>\n<p><b>Types of inventory costs<\/b><\/p>\n<ol>\n<li><span style=\"font-weight: 400;\"> Purchase cost: This is the purchase price of goods, which varies with the quantity purchased.<\/span>&nbsp;<\/li>\n<li><span style=\"font-weight: 400;\"> Ordering cost: These are the expenses incurred while creating and processing an order, including manpower, procurement cost, delivery cost, and quality control (QC) cost.<\/span>&nbsp;<\/li>\n<li><span style=\"font-weight: 400;\"> Carrying cost: These are the expenses of holding inventory, which includes the storage facility, insurance, theft, damage or depreciation of goods, etc.<\/span>&nbsp;<\/li>\n<li><span style=\"font-weight: 400;\"> Stockout cost: This is the lost sales associated with inventory shortage and order cancellations.<\/span><\/li>\n<\/ol>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"alignnone size-full wp-image-2087\" src=\"https:\/\/cdn.boxful.com\/2020\/07\/GuideInventory_1.jpg\" alt=\"\" width=\"1000\" height=\"546\"><\/p>\n<h3><span style=\"color: #00c4b3;\"><b>How to control inventory costs:<\/b><\/span><\/h3>\n<ul>\n<li><span style=\"font-weight: 400;\"> Track your inventory level<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Determining your optimal reorder point and production volume can ensure that you\u2019ll never overstock or understock.<\/span><\/span>&nbsp;<\/li>\n<li><span style=\"font-weight: 400;\"> Reduce obsolete stock<br \/>\n<\/span>Obsolete stock refers to the inventory that is not expected to be sold at the moment, for example, inventory that is in transit, unsalable, reserved, or waiting for inspection. You should reduce the amount of obsolete inventory to better utilize warehouse space.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h3><span style=\"color: #00c4b3;\"><b>Inventory management: the first step to revenue growth<\/b><\/span><\/h3>\n<p>Whether you\u2019re in retail, e-commerce or manufacturing, good inventory management can always reduce invisible costs for your business and bring new opportunities for generating growth. The following are a few advantages of quality inventory management:<\/p>\n<ul>\n<li><span style=\"font-weight: 400;\"> Reduced storage costs: Setting an optimum inventory level reduces the accumulation of excessive stock and releases storage space.<\/span>&nbsp;<\/li>\n<li><span style=\"font-weight: 400;\"> Reduced quantity of unsalable products: Quality inventory management reduces the quantity of unsalable products caused by poor decision-making or inaccurate estimation of seasonal demands.<\/span>&nbsp;<\/li>\n<li><span style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> Reduced loss of expirable goods: Special care should be taken of goods with a short expiration period, such as food, cosmetics or skin-care products. Keeping them in a climate-controlled storage environment and monitoring stock quantity can help avoid deterioration or expiration.<\/span><\/span>&nbsp;<\/li>\n<li><span style=\"font-weight: 400;\"> Increased cash flow: Maintaining an optimal inventory level avoids excessive accumulation of stocks and frees up your cash flow.<\/span><\/li>\n<\/ul>\n<h2><b><br \/>\n<\/b><b><\/b><\/h2>\n<h3><span style=\"color: #00c4b3;\"><b>Boxful\u2019s customized warehouse and order management system \u2013 a safe haven for your products<\/b><\/span><\/h3>\n<p><span style=\"font-weight: 400;\"><a style=\"color: #00c4b3;\" href=\"https:\/\/www.boxful.com\/en\/fulfillment\">Boxful Fulfillment<\/a> is a flexible B2B warehouse solution for businesses, which saves you the hassle of managing warehouse issues and manpower costs. Boxful provides a second home for your goods and you can rest assured that your products are in good hands.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Our customised inventory management solution offers four major advantages:<\/span><\/p>\n<ol>\n<li><b>Flexible pricing<\/b><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">We charge according to your actual usage, so you can free up your cash flow during non-peak seasons. <\/span><\/p>\n<ol start=\"2\">\n<li><b> One-stop warehouse and logistics services<\/b><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">We don\u2019t just provide warehouse services; our team can help you organize everything from warehouse management to logistics and improve your shipping efficiency.<\/span><\/p>\n<ol start=\"3\">\n<li><b> <\/b><b>Cloud-based inventory management system<\/b><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">We have an excellent back-end system which allows you to manage your inventory anytime, anywhere, and avoid human error in your inventory records.&nbsp;<\/span><\/p>\n<ol start=\"4\">\n<li><b>24\/7 security and indoor temperature and humidity control<\/b><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">Our warehouse is equipped with video surveillance, ADT security systems, automatic fire sprinkler systems, and a temperature and humidity control system, which keeps your inventory safe from mold and deterioration. We offer no-contract, flexible warehouse and logistics solutions for corporate companies and SMEs, helping businesses optimize cash flow and resources.&nbsp;&nbsp;<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><img decoding=\"async\" class=\"alignnone size-full wp-image-2086\" src=\"https:\/\/cdn.boxful.com\/2020\/07\/AGuide_2.jpg\" alt=\"\" width=\"900\" height=\"920\"><\/p>\n<p style=\"text-align: center;\"><a class=\"fasc-button fasc-size-medium fasc-type-glossy fasc-rounded-medium fasc-ico-before dashicons-calendar fasc-style-bold\" style=\"background-color: #00c4b3; color: #ffffff;\" target=\"_blank\" rel=\"noopener noreferrer\" href=\"https:\/\/www.boxful.com\/en\/fulfillment\">Learn More about Boxful Fulfillment<\/a><\/p>\n<p>\u2014\u2014<\/p>\n<p>Further readings\uff1a<strong><span style=\"color: #00c4b3;\"><a style=\"color: #00c4b3;\" href=\"https:\/\/www.boxful.com\/blog\/en\/warehouse-fulfillment-can-smes-benefit\/\" target=\"_blank\" rel=\"noopener noreferrer\">What is warehouse fulfillment and how can SMEs benefit from it?<\/a><\/span><\/strong><\/p>\n<p>Further readings\uff1a<span style=\"color: #00c4b3;\"><strong><a style=\"color: #00c4b3;\" href=\"https:\/\/www.boxful.com\/blog\/en\/good-practices-warehouse-management-cost-effectiveness-operational-efficiency\/\" target=\"_blank\" rel=\"noopener noreferrer\">Good practices for warehouse management for cost-effectiveness and operational efficiency<br \/>\n<\/a><\/strong><\/span><br \/>\nLearn more about&nbsp;<a style=\"color: #00c4b3;\" href=\"https:\/\/www.boxful.com\/en\/fulfillment\">Boxful Fulfillment<\/a>, don&#8217;t forget to follow<a style=\"color: #00c4b3;\" href=\"https:\/\/www.boxful.com\/blog\/en\/\">&nbsp;Blog<\/a>&nbsp;and&nbsp;<a style=\"color: #00c4b3;\" href=\"https:\/\/hk.linkedin.com\/company\/boxful\">Linkedin<\/a>&nbsp;with us today!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Inventory management is a specialist subject. It\u2019s not easy to determine an optimal inventory level \u2013 businesses need to increase their inventory in response to seasonal demands or price increases&hellip;<\/p>\n","protected":false},"author":1,"featured_media":2058,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[170,279],"tags":[],"class_list":["post-2094","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-posts","category-boxful-fulfillment"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>A Guide to Inventory Management and Resource Optimization | Boxful Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.boxful.com\/blog\/en\/guide-inventory-management-resource-optimization\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A Guide to Inventory Management and Resource Optimization | Boxful Blog\" \/>\n<meta property=\"og:description\" content=\"Inventory management is a specialist subject. 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