Benefits of an Inventory Management System

An accurate inventory management system can improve an organization’s efficiency and productivity. When items for both production and MRO activities are ordered as close to just-in-time as possible, a facility reduces the space, management, and costs associated with carrying excess inventory.

In addition, a lean inventory can improve cash flow, forecasting reports, organization, and supplier relationships.

Let’s explore these benefits in a little more detail.

1. INCREASED EFFICIENCY

Every item you keep in your inventory costs money month after month. By keeping your inventory as lean as possible, you reduce your overhead by eliminating purchases that may not be immediately necessary and minimizing item obsolescence. You’re better able to quickly identify needed items, acquire those items in a timely manner, and move them through your system with minimal delays and hiccups.

2. IMPROVED CASH FLOW

A healthy inventory management system means healthy processes, whether you’re keeping a production line up and running or moving finished units out for sale through retailers. You’re better able to fulfill orders, assess usage patterns, and minimize costs. Poor inventory management, on the other hand, can create delays when it comes to maintaining critical equipment, often resulting in hundreds of thousands of dollars in lost production.

3. BETTER FORECASTING

When you’re on top of inventory management, you’re better able to anticipate what items you need to order to keep everything running smoothly. That necessitates a solid inventory forecasting process, and that process in turn helps other areas such as financial reporting, just-in-time ordering, and minimized stock-outs.

4. INCREASED ORGANIZATION

Inventory management improves organization. When handled well, you always know exactly where everything is, how much of it you have in stock, and what it’s all used for. For instance, an MRO inventory tracked through a CMMS would be limited to only those items linked to your assets along with free stock and general supplies. The benefit here comes out to minimized waste in terms of time and purchasing decisions.

5. IMPROVED SUPPLIER RELATIONSHIPS

Effective inventory management incentivizes more consistent communication with your suppliers. You might make arrangements for recurring orders for frequently needed parts or negotiate better prices with suppliers you prefer to work with. In some cases, you may need to switch to suppliers who more reliably meet your facility’s needs, potentially creating a better (and more profitable) working relationship.