What is Inventory Management? | Inventory Types and Major Challenges | SafetyCulture

Summary

This video script delves into the crucial role of Inventory Management in maintaining business operations and profitability. It outlines the four main inventory types: Raw Materials, Work-in-Progress, Maintenance, Repair and Operations, and Finished Goods. The script highlights key challenges such as overstock or understocking, inventory visibility, market demand estimation, and supply disruptions. It suggests leveraging digital tools like iAuditor for efficient inventory tracking and management, streamlining processes and enhancing accountability.

Takeaways

• 📈 Inventory is a crucial asset for any business, essential for meeting production and consumer demands.
• 🔍 Inventory Management involves ordering, storing, and managing stock and raw materials, including monitoring product conditions and quality.
• 📦 There are four main types of inventory: Raw Materials, Work-in-progress (WIP), Maintenance, Repair and Operations (MRO), and Finished Goods.
• 🌱 Raw materials include unprocessed items like vegetables, meat, and wheat, also known as feed stocks.
• 🛠️ Work-in-progress (WIP) refers to products not yet ready for sale or service, encompassing raw materials and labor contributing to the final product.
• 🛡️ MRO inventory consists of machinery and tools for repair, vital for maintaining a business's production line.
• 🛒 Finished Goods are the final products ready to be served or sold to customers.
• 📊 Inventory Management is important due to its complexity and the need for good record-keeping to ensure smooth production processes.
• 🚫 Major challenges include overstocking or understocking of goods, which can lead to profit loss or missed sales opportunities.
• 🔎 Inefficient inventory visibility can be problematic; consistent tracking is necessary to inform future buying decisions.
• 📈 The ability to determine market demands is essential for businesses, as it helps in identifying high-demand markets for increased sales potential.
• 🔄 Supply disruptions can occur due to unforeseen circumstances, emphasizing the importance of managing safety stock inventory as a buffer.
• 💻 Digitizing inventory processes with tools like iAuditor can improve record-keeping, tracking, and accountability in Inventory Management.

Q & A

What is the primary purpose of Inventory Management?

Inventory Management ensures production and consumer demands are met by overseeing the ordering, storing, product sales, and managing stock and raw materials throughout the supply chain.

How does Inventory Management involve monitoring product conditions?

It involves monitoring the conditions and quality of products before they move to the supply chain, ensuring that only items meeting the required standards are included.

What are the four main types of inventory mentioned in the script?

The four main types of inventory are Raw Materials, Work-in-progress (WIP), Maintenance, Repair and Operations (MRO), and Finished Goods.

Can you provide an example of what falls under the category of Raw Materials?

Examples of Raw Materials include unprocessed items such as vegetables, meat, and wheat, also known as feed stocks.

What does Work-in-progress (WIP) Inventory refer to?

Work-in-progress (WIP) Inventory refers to products that are not yet ready for sale or service, such as spices, garnishes, or any raw materials and labor that contribute to the finished product.

Why is MRO inventory important for a business?

MRO inventory is important as it includes machinery and tools used for repair, which are essential to keep a business's production line running smoothly.

How does Inventory Management help in avoiding shortages?

Inventory Management helps in avoiding shortages by streamlining inventories and ensuring good record keeping, which assists in making informed buying decisions.

What are the major challenges associated with Inventory Management?

Major challenges include overstocking or understocking of goods, inefficient inventory visibility, inability to determine market demands, and supply disruptions.

Why can overstocking lead to profit loss?

Overstocking can lead to profit loss due to the costs associated with storing excess inventory, as well as the potential for items to become obsolete or spoil.

What is the significance of tracking inventory on a consistent schedule?

Consistent tracking of inventory helps inform how quickly ingredients and supplies are being used, which assists in future buying decisions and prevents shortages.

How can businesses improve their Inventory Management?

Businesses can improve Inventory Management by digitizing their processes with tools like inspection apps, which can establish good inventory record keeping and track progress and accountability in one place.

What is iAuditor and how can it be used to enhance Inventory Management?

iAuditor is an inspection app that can be used to digitize inventory processes, allowing for good record keeping, tracking of progress, and accountability, all in one platform.

Outlines

00:00

📦 Introduction to Inventory Management

This paragraph introduces the concept of Inventory Management as a crucial system for businesses to meet production and consumer demands. It covers the process from ordering to sales and emphasizes the importance of monitoring product conditions and quality. The paragraph outlines the four main types of inventory: Raw Materials, Work-in-progress (WIP), Maintenance, Repair and Operations (MRO), and Finished Goods, providing examples for each category.

🔍 Importance and Challenges of Inventory Management

This section highlights the significance of Inventory Management in maintaining a smooth production process through effective record-keeping. It discusses the challenges faced, such as overstocking or understocking, inefficient inventory visibility, difficulty in determining market demands, and supply disruptions. The paragraph stresses the need for good inventory practices to avoid profit loss and missed sales opportunities.

🛠️ Tools for Efficient Inventory Management

The final paragraph suggests that managing inventory can be complex and time-consuming without the right tools. It promotes the use of digital solutions like inspection apps, specifically mentioning iAuditor, to digitize inventory processes. The paragraph explains how such tools can help establish good record-keeping, track progress, and ensure accountability in inventory management, offering a more efficient and quality-driven approach.

Keywords

💡Inventory

Inventory refers to the goods and materials that a business holds for the purpose of resale or production. In the context of the video, inventory is crucial for meeting production and consumer demands, and managing it effectively prevents profit loss and operational disruptions. The script mentions different types of inventory, such as raw materials and finished goods, which are essential for a business's supply chain.

💡Inventory Management

Inventory Management is the system used to ensure that the production and consumer demands are met throughout the ordering, storing, and sales process. It involves monitoring product conditions and quality, as well as streamlining inventories to avoid shortages. The video emphasizes the importance of this system in maintaining a smooth production process and preventing issues like overstocking or understocking.

💡Raw Materials

Raw materials are unprocessed items that are used as inputs in the production process. In the video, examples of raw materials include vegetables, meat, and wheat. These materials are the starting point for creating finished products and are a fundamental part of inventory management.

💡Work-in-progress (WIP)

Work-in-progress (WIP) refers to products that are in the process of being manufactured or assembled but are not yet ready for sale or service. The script uses the term to describe items that contribute to the finished product, such as spices or garnishes, and labor inputs.

💡Maintenance, Repair, and Operations (MRO)

MRO inventory encompasses the machinery, tools, and supplies used for the maintenance, repair, and operation of a business's production line. As highlighted in the video, MRO items are essential for keeping the production line running and are a specific category of inventory.

💡Finished Goods

Finished goods are the final products that are ready to be served or sold to customers. The video mentions finished goods as the fourth type of inventory, emphasizing their importance in the supply chain and the need for proper management to meet consumer demands.

💡Overstocking

Overstocking occurs when a business has more inventory than necessary for sales. The video points out that overstock can lead to profit loss due to the costs associated with storing excess inventory and the potential for items to become obsolete or spoil.

💡Understocking

Understocking is the opposite of overstocking, where a business has less inventory than needed to meet demand. The script warns that understocking could result in missed sales opportunities when there is a high demand for products but insufficient stock is available.

💡Inventory Visibility

Inventory visibility refers to the ability to track and monitor inventory levels consistently. The video stresses the importance of this for making informed buying decisions and ensuring that ingredients and supplies are used efficiently.

💡Market Demands

Market demands are the needs and desires of consumers in a particular market. The script uses the example of a restaurant owner seeking out markets with high demand to increase potential customers and sales, illustrating the importance of understanding market demands for effective inventory management.

💡Supply Disruptions

Supply disruptions are unexpected events that interrupt the supply chain, such as shortages of raw materials or labor strikes. The video discusses the need to manage safety stock inventory to have a buffer against such disruptions and ensure business continuity.

💡Digitization

Digitization in the context of the video refers to the process of converting manual inventory processes into digital formats using tools like inspection apps. This allows for better inventory record keeping, tracking progress, and enhancing accountability within inventory management.

Highlights

Inventory is a crucial asset for any business, impacting profit and operational efficiency.

Effective inventory management prevents issues that could lead to profit loss or operational disruption.

The video introduces the concept of Inventory Management and its significance in business operations.

Inventory Management involves ordering, storing, and managing stock and raw materials to meet production and consumer demands.

It includes monitoring product conditions and quality before they enter the supply chain.

Inventories are streamlined to avoid shortages and ensure smooth operations.

Inventory is categorized into four types: Raw Materials, Work-in-progress, MRO, and Finished Goods.

Raw materials include unprocessed items like vegetables, meat, and wheat.

Work-in-progress (WIP) refers to products not yet ready for sale or service.

MRO inventory consists of machinery and tools used for repair, essential for maintaining production lines.

Finished Goods are the final products intended for sale or service to customers.

Good record-keeping is essential for managing the different categories of inventory effectively.

Major challenges in inventory management include overstocking or understocking of goods.

Inefficient inventory visibility can lead to poor tracking and decision-making.

Determining market demands is crucial for estimating supply and demand accurately.

Supply chain disruptions can occur due to unforeseen circumstances, affecting inventory levels.

Managing safety stock inventory is important to buffer against unexpected disruptions.

Digitizing inventory processes with tools like iAuditor can improve record-keeping and accountability.

iAuditor's mobile-first platform offers a head start in digitizing and managing inventory efficiently.

Transcripts

Inventory is a very important asset

for any business.

Managing it well helps prevent issues

that could contribute to profit loss

or operational disruption.

In this video, you'll learn what Inventory Management is,

different types and examples, and some major challenges.

What is Inventory Management?

Inventory management is a system that ensures production

and consumer demands are met

throughout the process of-

ordering, storing, product sales;

and managing stock and raw materials.

It involves monitoring the conditions of the products

and their quality before moving to the supply chain,

and also streamlining inventories to avoid shortages.

Main Types of Inventory

Inventory can be categorized into four types:

Raw Materials,

Work-in-progress,

Maintenance, Repair and Operations,

and Finished Goods.

1. Raw materials

Vegetables, meat, wheat and other unprocessed items

all fall under the raw materials category.

You might also know it by another name- feed stocks.

2. Work-in-progress Inventory or WIP.

Just like its name, Work-in-progress items are products

that aren't yet ready for sale or service.

These items might be spices or garnishes,

any raw materials or labor that contributes

to the finished product.

3. Maintenance, Repair

and Operating Supplies Inventory or MRO.

MRO inventory often refers to the machinery and tools

used for repair.

They are essential

to keep a business' production line running.

4. Finished Goods

The fourth inventory type is any finished goods

that will be served or sold to customers.

Why is Inventory Management important?

There are many moving parts to Inventory Management

and the different categories can be challenging to maintain.

It requires good record keeping

to ensure the overall production process runs smoothly.

Here are some of the major challenges:

1. Overstocking or understocking of goods

This is when a store has more or less products

than what they need to sell.

Having too much stock can lead to profit loss;

and having not enough could mean missing potential sales.

2. Inefficient inventory visibility

It's important to track inventory on a consistent schedule

from tomatoes and carrots to napkins and uniforms.

This will help inform how quickly ingredients and supplies

are being used and assist in future buying decisions.

3. Inability to determine market demands

Estimating supply and demand is essential for businesses.

For example, a restaurant owner

will want to seek out markets where there is a high demand,

increasing the chance for more potential customers in sales.

4. Supply disruptions

The supply chain can be disrupted

due to unforeseen circumstances.

It could be because there is a shortage of raw material

from the suppliers,

or when workers go on strike.

Therefore, it's important to manage

the safety stock inventory well

to make sure you have a buffer for unexpected cases.

All this is a lot to manage on paper.

Businesses can achieve both quality and efficiency

in Inventory Management by using the right tools.

It's possible to digitize your processes

with inspection apps like iAuditor.

And in doing so,

you can establish good inventory record keeping

and track progress and accountability, all in one place.

We're here to give you a head start!

Take advantage of iAuditor's mobile first platform today.

To learn more, click here.