Why Do Companies Implement an Inventory System?
Proper inventory management is a critical element of a company's success. In times past, companies used a simple card system for the task, but inventory management is now often handled by sophisticated software programs.
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Inventory costs
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Purchased inventory remains a large percentage of a company's cash outlay. Improperly managed inventory results in lost sales, overstocks, poor customer service levels, increased labor costs, reduced operating efficiency and lost revenue from investments.
Inventory management
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Effective inventory management requires accurately recording data. A company must know a product's movement at all phases of its life cycle, starting with purchase order placement through shipment to -- and possible return from -- the customer.
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Available applications
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Software terms like Enterprise Resource Planning (ERP), Manufacturers Resource Planning (MRP) and Warehouse Management System (WMS) flood the marketplace. ERP systems incorporate enterprise-wide applications. MRP systems manage manufacturing resources and WMS systems manage warehouse functions.
Competitive advantage
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Companies that retrieve accurate, timely information from an inventory system have a competitive advantage over companies unable to perform as well.
Why implement
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Inventory management systems get implemented for multiple reasons, but the primary reason remains money -- saved and earned. Companies require better, faster, more accurate data in order to reduce inventories to save money and increase service levels to earn more revenue.
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