Inventory Management 101: Key Factors to Determine the Right Time to Issue a Purchase Order – manufacture | warehouse | level
Inventory Management 101: Key Factors to Determine the Right Time to Issue a Purchase Order
When you’re running a business and you sell or manufacture products, you need to keep track of how much inventory you have. This means you need to know how many products you have in your warehouse or store. To know how many products you have in your warehouse or store, you need to physically count each item and record the number of items in an inventory system or spreadsheet. You can do this manually by counting each item and recording the count on paper, or you can use an inventory management system that allows you to scan barcodes to track inventory levels automatically.
You also need to figure out when to order more products to keep your inventory levels at a certain point. For example, let’s say you always want to have at least 50 items in stock so you don’t run out of products to sell. When you have only a few items left, you need to order more to get back up to 50. You need to have a system to prompt you to purchase, and if the supplier take days, You also need to figure out when to place that order so that you get the new items in time to sell them.
On hand + Projected Sales – Projected Purchases = Projected Inventory on Hand
This formula takes into account your estimated sales over a given period of time, your current inventory levels, and your expected purchases during that time.
In general, it is a good practice to issue a purchase order when your inventory levels fall below your established reorder point. However, to determine the best timing for your purchase orders, you should consider all of the factors listed above and develop a procurement strategy that meets the specific needs of your business.
Then you can automate this process to help you stay on inform of your inventory levels and make informed about when to issue, what to reorder, without the need for constant manual monitoring.