Businesses can only function efficiently as a result of different variables. Arguably, the most important of those variables is customer satisfaction. After all, without customers, there’s no business in the first place! But how does a company get (and keep) those customers? By tracking their available supply using different types of inventory.
Supply and demand is a common concept: your business succeeds when you have a supply of goods and/or services available to your customers. In order to create and maintain demand, supply must be constant. Knowing your inventory and maintaining a seamless communication system (like the messageboard offered by Sling!) within your company helps you keep supply up.
What Is Inventory?
Inventory is literally defined as a stock or store of goods. These goods are maintained by a business to meet demand and fulfill its purpose. Without proper inventory, the business may not know the amount of product (or services) they have on hand and, therefore, won’t be prepared—or even have the capability—to fill orders.
Say you own a retail store, and a customer comes in looking for new jeans. That customer may decide to shop somewhere else if you ran out of jeans yesterday and haven’t restocked them. It makes sense.
What’s more, if you’re a manufacturer, you must maintain several types of inventory in order to keep business ‘running as usual.’ You’ll also want to maintain some supply of finished goods in order to meet demand.
Types Of Inventory
When it comes to supply and demand, there are different types of inventory that business owners and managers need to know. Understanding these various types of inventory can help you better manage, plan, and budget. You’ll then be able to meet demand and thrive in the marketplace.
Generally speaking, inventory types can be placed into six different categories: raw materials; work-in-progress; finished goods; maintenance, repair, and operating (MRO) goods; services; and transportation. Each serves its own purpose in the successful operation of your business.
Raw materials are necessary to the life of any business. They’re made up of the materials your business uses to produce its own goods.
For example, water, sugar, and lemon would be the raw materials you’d need if you run a lemonade business. Without those raw materials, you can’t produce the beverage you market and sell. Lemonade on hand = satisfied (and no longer thirsty) customers.
If your company does not have a system in place to track its supply of raw materials, you can’t accurately forecast what you’ll produce over the next quarter or year.
Work-in-progress (WIP) is made up of the different parts that are being processed in a system, including all:
- Necessary materials
- Parts (components)
WIP usually includes raw materials that have been released for initial processing. It also covers the entire process of a production. Say, for example, you own an auto repair company. Brake pads would be part of your WIP.
Expert tip: Sling’s task feature would be idyllic for tracking the status of your employees assigned with changing the brake pads on a car at your shop.
Like you probably would have guessed, finished goods inventory includes any complete products that are now ready to be marketed and sold. If your restaurant business makes pre-packaged ice cream treats, for instance, the packaged and boxed ice cream cones would be finished goods inventory.
Maintenance, repair, and operating supplies—or MRO goods—are items put in place to maintain tasks in the production process. These goods are usually a major component of the production process but are not directly a part of the finished product.
Examples of MRO goods include gloves, packing materials, tools, etc. Even office supplies like staples, pens and pencils, copier paper, and toner—all of the little parts that keep the wheels turning—are considered MRO goods inventory.
Crucial to business success, service inventory includes the monitoring and management of all other types of inventory in the production process. In a way, it is sort of the “humanized” counterpart to MRO goods.
The comprehensive scheduling system offered by Sling allows you to maintain control of your service inventory by helping you organize your employees’ work schedules with ease. That way, scheduling is always simple and convenient!
Your business will be able to rest assured knowing the production process is on a continuum and that your employees will always be on hand when needed. Now that’s what you call service inventory!
Transit inventories are crucial to businesses that need to transport items or materials from one location to another. Merchandise shipped by truck or rail can sometimes take days (or even weeks) to go from a regional warehouse to your retail facility.
Inventory in transit must be accounted for when it comes to supply and demand, along with the timelines for those demands to be met.
Inventory Means Little Without A Management System
Unfortunately, simply understanding types of inventory for business is usually not enough. To effectively utilize the various inventory systems, your business should put in place an effective employee/inventory management system.
Businesses need a single space to post information related to company happenings, processes, and statuses. The Sling newsfeed provides a place that is easily accessible to all employees. Companies are able to share updates and news with various groups of people, keeping everyone on the same page and bringing teams together.
Seamless communication and management systems are necessary for maintaining a successful cycle of supply and demand. That, along with a solid foundation and management department, is also crucial in accurately monitoring your business’s different types of inventory.
From the retail and service industries to the healthcare and non-profit sectors, tracking your company’s inventory and supply and demand cycle will help you manage your business more effectively. Soon enough, you’ll notice that business success is as easy as making that lemonade we mentioned earlier in the article.
Happy (and effective) tracking makes the business boom!