What is the role of inventory management in order processing? (2024)

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In my experience, one of the big challenges with Inventory management systems is the inventory mismatch between what is available vs what is available for Sale. Also, to fulfill an order it's just not the inventory alone that matters, we should consider capacity and delivery availability. If we don't consider these, the customer can search for a product, and add it to the cart but an error during checkout due to capacity issues or delivery is not available for the customer's address.

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This step would be more essential one related having accurate inventory. If it would be secured during or better before this step, proper planning shall be possible for further processes such as commitment to the customer, placing orders to the suppliers, internal production and delivery preparation. Having failure at this stage would break the chain and create a domino effect.

Inventory management is integral to order processing as it influences the efficiency, accuracy, cost-effectiveness, and customer satisfaction aspects of fulfilling orders. It's not just about keeping stock but also about smartly aligning demand with supply, managing resources, and ensuring that the entire order cycle from placement to delivery is smooth and efficient.

This answer will depend on the structure of your organization. I prefer a robust Inventory Control team that manages the financial piece of inventory management through cycle counting, analytics, adjustments, and corrective actions. Maintaining accurate inventory at the pick faces will drive efficiency in picking. A secondary task that I think belongs in Inventory Control but might sit in Engineering is the slotting strategy. Proper slotting can dramatically increase efficiency reducing travel, replenishments, and touches. The inventory stocking plan can also be included in an Inventory Management. I believe that sits better in a Procurement or Supply Planning function.

For a lot of businesses order fulfillment is the biggest bottleneck that they have to deal with and it quite literally chokes the business dry in no time if not handled correctly.A lot of companies realize at this very stage that they may not have the inventory or cannot meet the customers' exact specifications, but its already too late and costs start piling up, especially if it is a fast moving product. The lack of efficient order fulfillment can have widespread effects, the most major of them being customer dissatisfaction. Do it too many times, and the business will head to a stop before you even realize it.

In the present market scenario where it's not just competition from your peers but also a channel conflict that can occur while ensuring customer service organizations need to have a key focus on how to ensure product availability across channels.Replenishment is one piece of the puzzle but a well managed mechanism to track your slow moving inventory and plan a strategy on minimizing it is critical.A non moving stock is not just a potential business waste but also a wastage of space, a resource both scarce and expensive by nature.

Keeping the inventory close to the customer can significantly improve the order delivery and increase the conversion rate. Speed of delivery is one of the key metrics to be measured. This can be achieved by proper forecasting of inventory needed at a location and partnering with 3rd party logistics.

Effective inventory management not only mitigates backorders by maintaining optimal stock levels but also enhances working capital management by minimizing excess inventory, freeing up capital for better resource allocation.

In my experience, one vital aspect often overlooked in inventory management is the importance of continuous evaluation and adjustment. While systems and processes are crucial, the agility to adapt swiftly based on evolving market dynamics and consumer behaviors is equally critical. I've seen instances where companies, despite having robust systems in place, faltered due to a lack of proactive adjustments in response to changing demands or supply chain disruptions. Flexibility is key!

Forecasting and demand planning: Effective inventory management involves forecasting demand and planning inventory levels to meet customer demands without excessive overstocking or stockouts.Cost control: Managing inventory effectively helps in minimizing holding costs, reducing obsolete inventory, and optimizing stock levels, thereby controlling overall operational costs.

To manage your inventory effectively, you can follow a 4 step process:Assess what you have now.Review what you had.Analyse sales.Identify items to repurchase or retire.