Inventory management or inventory control is the process of monitoring the warehouse of a business to ensure that the stock is being used at the optimum level and is managed well. An inventory management software manages the following:

1. Stock from the time it is ordered
2.  Movement of the stock within a warehouse to multiple warehouses
3.  Status of the stock till it reaches its destination or disposal

In this blog post, we will throw light on the benefits and key features of the inventory management. 
So without any delay, let’s get started!
Before we walk you through, let’s understand the importance of inventory management. 

Why Is Inventory Management Important?

Inventory management allows you to track the status of your stock levels across all your warehouse locations across all the inventory phases. With the right inventory management, you can ensure that you never run out of a product and also prevent overstocking of a particular product. 
On top of that, it also helps you understand the demand to prepare a strategy to process more orders quickly. Additionally, inventory management benefits and prevents overselling and can help you improve the reputation of your organization. There are multiple ways by which the inventory management benefits your business.

Why Do You Need an Inventory Management System?

Proper inventory management improves the operational efficiency and allows you to perform the following operations:

1. Track the status of your stock
2. Streamline different processes
3. Inventory forecasting & planning

Here are the benefits of inventory management for your organization:

Automated Inventory Management

One of the biggest benefits of inventory management is to automate multiple operations and processes. Automation eliminates human error, saves time, and decreases the probability of mistakes. An automation system is capable of executing repetitive tasks with little assistance once you have set up some rules.
Automated inventory management enables you to have real-time visibility of your inventory levels. This feature plays a vital role in accurate forecasting and delivers a unique customer experience. It offers you real-time insights into where your stock is particularly in different locations such as a physical store or a warehouse with multiple sales channels.

Inventory Forecasting

Accurate demand forecasting helps you to keep up with the demand. Seasonal data can also be utilized to understand any changing patterns that require adjustments in stock at different times of the year. The inventory management helps you with accurate inventory forecasting to streamline order volumes.

Helps Prevent Overselling & Stock-Outs

Overselling is one of the biggest issues for growing eCommerce businesses and startups. In case you do not have supervision on your inventory, you might run out of stocks. Such a scenario is called stock-out. Stock-outs not only prevent your customers from returning to your business, but also suspend your business from entering certain marketplaces.
Inventory management process manages all your orders across all your sales channels and helps prevent stock-outs. With the right inventory management, you can easily replenish your stock and track them easily.

Reduces Your Business Costs

An advanced inventory management report tells you what you have in stock. This helps in managing your warehouse so you do not waste time looking for inventory that is not available at your warehouse. 

The inventory management saves your time and streamlines the following processes:

1.  Picking 
2.  Packing
3.  Shipping

With accurate data and insights, you can have a clear idea of the products your customers are interested in. Focusing on the products your customers are buying is a great way to cut down eCommerce costs.

Inventory Planning & Forecasting

Information management and accurate reporting are two key pillars to successfully running and growing a business. The inventory management process integrates with multiple marketplaces and sales channels. Such a system also smoothens shipping and third-party logistics (3PL) processes with real-time visibility across your organization. 

This further allows you to improve your business and reduces wastage in different costs including:

1. Unsold stock
2. Unwanted stock
3. Stock in the wrong locations

Improved Supply Chain Operations

Supply chain management involves tons of challenges. With the integrated inventory management system in place, different eCommerce businesses and retailers can efficiently prepare and incorporate a supply chain management. 
The more suppliers you have, the more you can narrow down the wait-time if a particular supplier cannot deliver on the deadline. You can prepare yourself for the next phase of your business-like peak season to order the right amount of stock from a supplier and prevent any order management issues.

Adding New Sales Channels

Ever wanted to try a new sales channel to list your products? An inventory management system smoothens the process of adding new sales channels and centralizes your inventory. With such a system in place, you can track the efficiency of your inventory in different locations. 
Inventory Synchronization and Forecasting are two key factors that help maintain your inventory control and allow you to sell your stock in multiple locations at once.

Establishes PAR Levels

PAR levels or Periodic Automatic Replenishment levels allow you to set an amount of inventory that should be available at all times. You should replenish your stock control when they reach these levels.
This allows you to balance and maintain the standard demand rate for specific items. The Periodic Automatic Replenishment level of an individual item varies but you can find out the accurate level using your average daily sales volume, the lead time and safety stock number for each product.

ABC Analysis

The demand for different products might not be the same and is unevenly distributed between your stock. ABC analysis enables you to streamline this uneven distribution by categorizing your products into three categories (A, B, C) based on the following parameters:

1. Demand
2. Supply
3. Value
4. Costs

Bifurcating your stock enables you to prioritize ordering specific items you have shortlisted.
So that is how inventory management benefits your business. Let’s now check out some key features you should expect in the inventory management for your business.

Key Features Of An Inventory Management System

Do you want to harness the power of the inventory management for your business? Are you facing problems related to increasing costs, low profitability, and efficiency issues?
Here are some features and benefits of inventory management to look out for in 2022.

Real-Time Tracking

1. Reflecting the status of the inbounds goods as soon as they are scanned at the warehouse
2. Managing your warehouse transfers
3. Eliminating the new assembly runs if the components were used in different operations
4. Tracking the consignment stock even if it is in a different store
5. Stock control

Real-Time Inventory Value

An inventory management process stays updated in real-time as per your accounting software. With such a system, you have access to:

1. Exact inventory values that are responsible for the volume and prices of your purchases
2. Multi-currency support for your vendors and buyers worldwide
3. A perfect line-view of your inventory according to different geographies
4. Ability to efficiently track the production wastage and courier fees
5. The ability to create product listings to offer a detailed view of your COGs (Cost Of Goods sold)
6. Ability to have profit margins on your products according to the sales channel and its location

Alerting Systems For Low Stocks

Sometimes you might not know the exact amount of stock you have. In such a case, a powerful inventory management needs to set automatic low stock alerts when a particular stock is running low. 
This gives you the insights and time frame to procure that stock or generate a purchase order for that particular stock. You need to prepare a reorder report that lists everything so you can manage your stock control.

Supplier & Purchase Management

With a proper inventory management tool, you have access to control your purchasing. Keep in mind that you should not waste time in transferring your inventory data into your purchasing process. The right inventory management allows you to:

1. Generate and fill your orders automatically
2. Store all your supplier orders and details
3. Generate quantity discounts for your suppliers for optimal purchasing
4. Check the transaction history of your suppliers
5. Receipt an order if your goods are scattered

Proper Reporting

Getting a fancy inventory management is meaningless if you have to manually extract all the data every month. The main benefit of inventory management is to reduce the admin operations and streamline automation.

Here is what to expect from an inventory management software for your business:

1. Margins
2. Unit sales
3. Stock control
4. Backorder rate
5. Inventory turnover rate
6. Average number of days to sell for each SKU

Bills Of Management (BOM)

Bills Of Management are the elements that define the uniqueness of an assembled product. If your inventory management manages your BOMs, it becomes very easy to order the right components in the right quantities for production.
An inventory management process auto-fills the purchase orders right from your BOMs. This allows you to nest multiple levels of BOMs for more assembled products. Apart from that, you can record the value of any production waste as well.

Serial Number Tracking

Similar to the batch tracking feature, serial number tracking has its unique identifiers. This feature allows you to have the serial number for tracking if you have high-value components. Serial Number Tracking also helps in after-sales service so you can offer a unique experience to your customers.

Batch Tracking

The right inventory management should offer a batch of inventory tracking feature. Batch tracking keeps you on top of the stock batches through which you can easily monitor the expiry dates, stock, condition of the goods and more before they lose their important feature for manufacturers who require robust traceability systems if they want to recall the status of their products.

Conclusion

Harness the power of the right inventory management process with TYASuite and increase profitability, improve operational efficiency and reduce costs at the same time. Our Cloud ERP suite automates your inventory management processes and saves time so you can focus more on growth and marketing. 

Get all this while having complete visibility into your stock movements and sales data to spot more growth opportunities. Contact Us today and mitigate your stock issues even before they arise!

Introduction

In today's business, procurement systems are progressively seeing as vital strategic contributors to their value plan and matching end-user goals. A reliable procurement system is one created to improve accuracy, efficiency, and speed. Because of this view observed by many, the need to standardize business processes within procurement process and ensure best practices becomes very important to the overall business. But despite all the security measures taken in creating a standardized business strategy, sourcing issues still arise. Procurement challenges, ranging from organizational inadequacies to human error, can in turn have an adverse impact on a company's sourcing and purchasing ability. Here are some common challenges in procurement and solutions, courtesy of industry experts.

Top 10 Procurement Challenges and their Solutions

The following are the top ten procurement challenges that Businesses face and need to mitigate –

• Reduction in Quality to Reduce Costs

In today's business world, cost is still a very important factor when it comes to consumer products. This is especially true when it comes to products that are seen as luxury items, like cars and clothing. We see businesses continuing to cut costs even though this has detrimental effects on the quality of their products. In many cases, the quality dimension is altered in order to save money and management has high expectations that the quality risk will not be detected.

Solution: To solve procurement challenges, businesses need to realise their profit margins and create better funnelling of customer and consumer feedbacks in order to create sustainable business practices and exclude cost cutting and quality degradation.

• Lack of Clarity in Specifications and Requirements 

Providing vague specifications and requirements when procuring doesn't always work and fits the "help me" scenario. If an organization has clear and defined requirements for what it wants from its suppliers, the supplier can usually do a much better job of fulfilling those requirements.

Solution: A procurement management software can allow businesses to create flexible requirement data sets that can be easily shared with suppliers for better clarity.

• Lack of Formidable Assessment of the Supplier before the Initiation of Business

Organizations often ignore supplier evaluation and stick to what suppliers promise on paper. Keeping suppliers at arm's length without any form of assessment can leave room for irregularities and untrustworthy experiences. A lack of trust can cause procurement challenges between the parties involved in a deal.

Solution: Before choosing a provider, do careful supplier evaluation criteria and/or assessment. After being chosen, aggressively include key suppliers in problem-solving procedures. Positive results for general growth follow from it. Consider your supplier to be strategic partners in business.

• Having a lack of considerable knowledge about the Supplier Capabilities 

Lack of knowledge of supplier capabilities will almost certainly result in dissatisfaction when potential procurement challenges occur. When a supplier is expected to finish a procurement process quickly beyond his means, the results are typically devastating. When it comes to suppliers, this procurement issue is one of the most difficult ones that experts in procurement face. In order to get more from your suppliers, the process—from choosing the finest to guaranteeing consistent and high-quality delivery—can be quite important.

Solution: To guarantee that all delivery requirements and standards are followed, procurement specialists must continuously monitor suppliers in addition to the conventional procurement process. With deadlines in place and quality agreed upon, begin with progressive increase. In other words, do routine supply reviews, talk about important performance KPIs, and come to an agreement on improvement and action plans.

• Lack of Agreement on Significant Key Performance Indices 

Implementing best practise procurement requires the use of crucial KPIs. Supply chain best practises utilise five crucial elements (variation, variety, velocity, visibility, and volume). Many procurement specialists are unaware of the need of asking challenging questions about the contributions a new supplier makes to the equation. Although they can be useful, factors like purchase price fluctuation, percentage cost reduction, timely delivery, etc., are insufficient. Furthermore, these activities frequently clash with important strategic ones that have long-lasting effects.

Solution: KPIs should be the principal topic on the agenda for routine supply reviews after they have been agreed upon. A procurement system that delivers a balance between cost, customer value, quality, and speed should be used by the management system.

• Lack of Supplier Business Trust

Such businesses typically retain suppliers at arm's length in situations where there is zero trust for a provider. The approach is similarly comparable to having little confidence. Some people may not take well to the display of mistrust toward suppliers, and this might result in a number of challenges in procurement. But even so, put your own security first and exercise caution.

Solution: It is important to identify trustworthy suppliers who can form long term association with the business and can operate as partners rather than procurement channels alone.

• Lack of Business Supplier Transparency

Organizations' tendency to suppress important information leads to procurement challenges that prevent suppliers from giving customers value-packed products. Critical data, such as market trends, product updates, and sales projections, might lead to unpleasant shocks that could damage your supplier relationships.

Solution: As much as businesses need to be clear about their requirements, suppliers are expected to be clear about their capabilities to reduce and eliminate gaps in promise and delivery. Transparency is the key to achieve that.

• Lack of Formal Contract in the Business Proceedings

More than 40% of vendors on a company's supplier list do not have a formal contract. Legal documents and  contracts may be difficult and time-consuming to draught and alter. When there are frequent requests (for expressions of interest, proposals, quotes, etc.) and managing them takes time, challenges in procurement management may occur. Such processes must be followed in a straightforward, equitable, and comprehensive manner. Avoiding them could lead to greater procurement challenges, even though it calls for good work from the procurement teams.

Solution: Before setting out into any sort of association the establishment of a formally and legally binding partnership of association contract must be mandated within the business to ensure legally binding promise and delivery.

• Inflexibi lity of Suppliers

A number of procurement choices are made in conjunction with the company risk management plan. Low expenses, for example, better represent the outcome of business activities. However, some suppliers could not offer savings or continue to include certain levies. With your suppliers, you should frequently find opportunity for bargaining as a knowledgeable procurement specialist.

Solution: See what negotiation possibilities, such as discounts, may be advantageous to your company before choosing a supplier. Keep doing business with suppliers that understand and respect your goal of maximising performance to avoid procurement challenges.

• Lack of the Access to Accurate Data

The possibility for excess inventory, inventory shortages, and various additional procurement challenges with the ability to negatively impact your organization's bottom line might result from creating purchase orders based on inaccurate procurement data.

Solution: Establishing accurate data sets and data driven analysis and business parameters should be the industry standard.

With the right cloud procurement software, you will stay on top of procurement challenges and make better-informed business decisions that empower your organization to lower operating costs while reducing administrative burden related to procurement and management

Conclusion

The above enumeration concludes the top ten procurement challenges and how organisations can navigate them professionally.

TYASuite cloud-based software is been designed With the new technology trends and advancements which can help you come up with the challenges faced and make your business organised.

Before the development of e-procurement software, the company's procurement was usually handled on paper. Earlier it was riddled with many inefficiencies and very time-consuming. As the usage of the internet grows, procurement tool functions were transferred to websites and emails. With the advancement in technology, companies have preferred using procured technologies and to buy these tools that will help them with the automated process and increase their profit margins. Also, the technology aids help in improving transparency, transaction visibility, reliability and is cost-effective across the supply chain.

In 2020, the procurement tool vendors have nearly 5.6% of the global procurement applications market which declines to 2,8% which comes to around $4.45 billion for license, subscription, and maintenance revenues.
 The procurement tool applications are designed to purchase materials, whether direct or indirect, processed or raw or completed, which has resulted in the flow of product supply chain for a specific business process or with the support of performing service or services.

The other function in the applications includes electronic network, sourcing, contract management, and ratings that help to optimize the supplier relationship management. The procurement applications help to represent the major contributor to enterprise resource planning as an important part to exercise the market size.    

What does procurement tools do?

Top procurement tools enable businesses to manage and streamline their spending, which in turn increases overall cost savings for the business.

Procurement tools are a crucial component of any modern business, since they help organizations cut costs while improving efficiency and productivity. Here are some examples of how procurement tools can benefit your organization:

1. Improves efficiency - By automating processes and reducing manual work, procurement software solution helps save time and increase productivity for all types of employees across an organization. In addition, it also improves employee retention by reducing errors and providing a better customer experience.
    
2. Eliminates waste - Cloud Procurement software helps eliminate unnecessary expenses through real-time tracking of orders, inventory levels, and suppliers' performance against their contracts with the business. This means that no matter who is filling out paperwork or what stage of the process is being automated, it's all happening with one click from a single screen!
    
3. Improve supply chain visibility - With a procurement management tool, you’ll have better visibility into your supply chain so that you can make informed decisions about what products to buy or where to source them from. You’ll know exactly where each item is being sourced from, which means that you can cut down on unnecessary middlemen fees and pass those savings onto your customers!
    
4. Eliminate manual spend analysis - With a procurement management tool, you can eliminate manual spend analysis as well as other manual tasks that take up your time and resources. This will save you time and money in the long run.
    

The Top 8 Procurement Tools:

1. Precoro: The Precoro, ground control purchasing tools that help to easily create custom purchase orders, track approvals of managers and assign each payment with the correct budget.
   The procurement tools offers features like order creation, delivery, quick data analysis, billing, approved workflows, vendor management, etc. The templates can be used to keep things simple and users can add extra fields in the procurement forms that contain important information.
    
2. Kissflow Procurement Cloud: It is a flexible procure–to–pay solution that help all size of businesses to streamline their procurement process. With this tool, the company can streamline its procurement strategy and boost productivity. With this unified platform, users can get the benefits of procurement, AP automation, punchout clouds, management, supplier portals, custom integrations, inventory management, and more.
    
3. TYASuite: This procurement tool is mostly designed for medium and small-sized enterprises. This tool helps to improve and enhance the growth-related need of a company. It’s a user-centric platform that helps in providing accuracy over the cross-departmental operations. TYASuite streamlined approach to procurement management helps buyers, procurement and finance teams in companies reduce the time spent on paperwork and streamline processes. Such benefits include significant cost savings through increased visibility of spending, annual savings through reduced delays and errors, and corporate social responsibility benefits that arise when the correct amount is paid by the correct people at the right time in accordance with policy. 
    
4. Planergy- It is a spend management platform that focuses on making the payment process more and more easier for everyone, and with planergy you can enjoy those benefits with purchase orders. 
   You can create departmental budgets and set the limit for spending, purchases, and pre-approved vendors and you can also set direct instruments during the time of purchase.
    
5. Veeqo: It is designed for a specific form of business. As a retailer business follows tougher procurement and purchasing needs as compared to other businesses. They constantly order and re-order stocks and make a quick turnaround and larger margins. Therefore the retail brand uses Veego to handle this inventory. 
   The procurement management tool help with purchasing, inventory forecasting, and managing orders that ensure the customers always receive what they need on time.
    
6. Coupa Procurement: It is a business spend management tool that have helped most companies globally to get more visibility and control the overall spending to improve operational efficiency, and financial risk, reduce the involvement of the third party and increase the bottom line. It has helped many companies to get more value.
    
7. SAPAriba: It is a cloud-based procurement tool, that tracks the amount spend and a supply chain management solution for the buyers within a single platform. It’s all in one integrated framework that helps to manage anything from sourcing to the payment process. With SAP Ariba you can digitally transform the supply chain, contract management process, and sourcing.
    
8. GateKeeper: With Gatekeeper you can easily control the relationships between the employee and its company and the external suppliers. The procurement management tool has two different platforms- the vendor portal and the employee portal. It serves the goal to digitize and automate a wide range of process that was traditionally done by following the manual process. The gatekeeper tool also provides you with customizable workflows and ready-to-use templates for a better possibility.

Whether you are owning an e-commerce business or has huge stock turnover, a tech company has to handle many invoices from all the suppliers or a company that needs help with the payment process, so to help you sort out these issue, one of these procurement management tools is all you need.
So without wasting more time and efforts on the manual process of procurements you need to get these tools. These are some of the industry’s best procurement solution tools that are used by several top companies and they have achieved huge success through it.   

You may have seen people use procurement and purchase interchangeably. As both terms are used frequently in organizations while buying goods and services, many often mistake these terms. Some are very ignorant about these terms and don't even care what terms they use during formal conversation.

If you dive into the seas of technical terms and organizational language, you will realize that the terms are different and must be used appropriately for official conversations. Why does the distinction matter? Because it lets the management execute these functions and increase the value they offer to the company. And if there's a mixup or misunderstanding, it will affect the entire team and process.

Several organizations use procurement software tools such as TYASuite for the automation of these processes. And it helps the organization to function efficiently.

Now, How do you differentiate between procurement and purchase?

To differentiate these terms, you need to understand the definition of procurement and purchase these terms. Then, you can understand how and where the difference arises.

Before the definitions, let’s take a quick look at the process involved in both. The flow chart of the procurement vs purchase process will make it easier for you to understand the differences and similarities.

Procurement process

1. Identify needs

2. Research and source supplier

3. Create supplier list

4. Issue RFQ

5. Evaluate supplier quotes

6. Negotiate contracts

7. Receive product/service

8. Performance check

9. Analyze KPIs and margins

10. Builder supplier relationship

Purchase process

1. Receive purchase requisition

2. Evaluate receive RFQ

3. Create purchase orders

4. Receive product/service

5. QA of product/service

6. Process payment to supplier

Definitions

Procurement

In short, you can define procurement as, "a series of processes that are executed to acquire goods and services for a firm."

Procurement is actually an umbrella term with a subset of processes that help fulfill the requirements of goods and services of a firm. Each firm has a unique procurement process, but, a common framework of the method can be listed below:

• Recognizing business requirements and raise PR
• Identifying, analyzing, and selecting relevant suppliers
• Negotiating contracts with chosen suppliers
• Create PO
• Quality checking of goods
• Invoicing and starting off payments to the suppliers

Purchasing

The term refers to the set of procedures related to the execution of transactions between a firm and its suppliers to buy goods and services.

Purchasing is a subset of procurement, and it begins and ends with placing and receiving an order.

These definitions are enough to understand the meaning and the correct usage of the terms.

Now, let's look at the key differences between procurement and purchase.

Strategic vs tactical

If you read the definitions carefully, you will understand that procurement is a strategic function, whereas purchasing is tactical. Purchasing starts and ends with the pacing of the order and receiving (it), whereas, procurement begins when there is a requirement of gods or services. Procurement involves aspects such as finding the right supplier, analyzing the pricing, supply chain, etc.

Goals or targets

Purchase is totally focused on the cost of the orders, and procurement focuses on the creation of value and TCO (Total Cost of Ownership). Purchasing is concerned with the minimization of cost and procurement aims to mitigate risk, cost savings, relationship with suppliers, etc.

Supplier relationship

Purchasing process doesn't have anything to do with the supplier relationship. However, procurement places high importance on building long-term and cooperative relationships with the main suppliers. The procurement process considers the suppliers as strategic partners.

Evaluation of risk and mitigation

Mitigation of risk is not needed in the purchasing process. The risks are of various kinds such as operational risk, data security risk, financial risk, etc. Only the procurement process is concerned with identifying these risks and analyzing which ones impact the business and stakeholders.

The next important question is when to use these terms or when do companies use procurement vs purchase processes?

There are various factors that decide the usage of these methods of acquiring goods and services, they are:

Time

If the requirement is immediate, firms purchase the goods and services. Procurement usually takes longer to happen as it involves steps like a request for proposal creation, supplier selection, and negotiation of the contract.

Quantity 

Procurement is the best form of acquiring goods and services in huge quantities for a longer period.

Customization

If the firm needs to customize some products or goods, procurement is the best route as the firm can work with vendors to make sure they understand your requirements

Price 

Purchase of services is cheaper than procurement services. It also depends on the conditions

Relationship

Purchasing is simple and vendors like it, because nobody wants to go along with the long process of procurement.

Now that the difference between procurement and purchase is clear, let's look at how firms automate both processes.

As mentioned earlier, procurement is a process of searching and agreeing to the terms of purchase. It involves identifying potential suppliers, negotiating contracts, and selecting the supplier that provides the best value for money. And purchasing is the process of direct buying of goods and services.

For making the process automated, firms use eProcurement tools, such as TYASuite. You can check the Request for Quotation, issues in orders, and track deliveries. eProcurement can help streamline and automate your procurement and purchasing process.

Conclusion

In short, people look at procurement and purchase as interchangeable terms, and the terms comes into the picture when there's a requirement for goods and services. Proper understanding of these terms is necessary to do business, and every employee of the organization must understand the difference between these terms.

A thorough understanding of these terms will help one converse with your colleagues, clients, customers, business partners, and recruiters. And a lack of knowledge about procurement vs purchase will lead to complications and related issues.

What is Inventory management?

The concept of inventory management mainly represents the procedure of storing, using, ordering and selling a business's inventory. It includes the management of components, raw materials, finished products and warehouse processing products. Besides this, inventory management practices try to streamline inventories from raw components to finished products efficiently. The inventory of a company is considered one of the most important assets in all industries such as food services, manufacturing, retail and others.

Types of inventory management?

Based on the type of products or businesses there are some inventory management procedures. Some of the procedures are materials requirement planning (MRP), just-in-time (JIT) manufacturing, day sales of inventory (DSI) and economic order quantity (EOQ).   

MRP (materials requirement planning)

This inventory management procedure is considered as sales-forecast dependent. In this term, it mainly focuses on monitoring accurate sales records of manufacturing products to enable appropriate inventory needs of the business. Along with this, it is also useful for ensuring the communication regarding material supply on time. Besides this, the inability for presenting accurate inventory plans and forecast sales has benefited from the application of the MRP procedure.

DSI (day sales of inventory) 

It is a financial ratio. DSI mainly indicates the average time in a day that an organization takes to turn its inventory into sales including goods and work progress. Additionally, it is also known as average age of inventory, inventory outstanding and also days in inventory (DII). These are interpreted in multiple ways. The prime feature of the DSI procedure is to indicate liquid inventory management. Moreover, the figure of liquid inventory represents what the stock of a company could stay for how many days. In this context, a lower DSI indicates a shortened inventory clear-off duration, whereas the average DSI varies across different industries.  

JIT (just-in-time)

This method of inventory management permits organizations for reducing waste and saving money by keeping records of inventory that is required for selling as well as producing products. JIT also helps in reducing insurance and storage costs along with liquidating costs or excess inventory discarding efficiently. On the other hand, to some extent, JIT is considered risky. In this term, it can be explained that if unexpectedly demand increases, then the manufacturer may not be able to fulfill that properly due to limited inventory. Therefore, it will damage the reputation of that organization as it will be unable to meet consumer demand spikes. Moreover, it will also be responsible for declining the competitive advantage of a company across the markets.

EOQ (economic order quantity)

This type of inventory management procedure is mainly applied to calculate unit numbers of a business that should be added to its inventory. It is also associated with batch order in terms of reducing total inventory costs by assuming constant consumer demands as well. Additionally, EOQ also includes the setup and holding costs of an organization's inventory. This inventory procedure is effective for ensuring adequate inventory amounts per batch order. Therefore, it helps a company to maintain a record for batch orders and helps to avoid excessive and frequent ordering issues simultaneously. Besides this, it assumes a trade-off between inventory setup costs and inventory holding costs. Moreover, by determining both inventory setup as well as holding costs, the total inventory costs of an organization can be reduced. 

Importance of inventory management?

There is a wide range of importance regarding inventory management process and some prime ones are mentioned below:

1. Control paves related to competitive ability

Usage of cloud based inventory management enhances market share and, in this way, it increases the competitive ability of a company. High-factor loading values, as well as significant mean values, have performed a vital role in determining business support concerning its competitive ability. 

2. Improving service level

Inventory management software leads to improving service levels as per the requirements of consumer preference swiftly. It aids businesses by allowing a company to right level of hands-on service within desired lead time. 

3. Reducing storage costs

Proper application of inventory planning helps a company to reduce excess storage costs by maintaining adequate inventories. The central values of inventory management process feature lower storage costs and enhanced revenue increase.

4. Higher revenue turnover

The application of a proper inventory planning approach helps a business to enhance higher revenue. Appropriate application of inventory management helps to increase organizational profitability. In this term, if a company focuses on its benefits, it is seen that inventory management maximizes the operational efficiency of sales and production.

Terms related to cloud based inventory management

• Bundles

It represents a group of products that are sold as a single product such as a camera, bag and lens as 1 SKU.

• Barcode scanner

It is a physical device that is mainly used for check-in as well as check-out stock items. Moreover, it is effective for third-party warehouses and in-house stock fulfillment segments.

• Deadstock

Deadstock represents items that have not been sold or used by consumers.

• Costs of goods sold (COGS)

Direct costs are mainly associated with production and goods storing costs as well.

• Decoupling inventory

It is also known as safety stock. Mainly it refers to safety net inventory management process for mitigating risks in terms of completing production halt of available components featuring segments.

• Holding costs

Holding costs or carrying costs are considered as the business cost which incurs for storing and holding stock in a warehouse until those are completely sold to consumers.

• Landed costs

It mainly represents the costs of storing, shipping, duties, taxes, import fees and other related expenses that are associated with buying as well as transporting inventory. 

• Economic order quantity (EOQ)

This term represents how much a company can reorder for taking into account demand and for maintaining inventory holding costing segments.

• Purchase order (PO)

It mainly refers to commercial documents between a buyer and a supplier that outlines quantities, agreed prices and types of service or products.

• Pipeline inventory

This term represents the "pipeline" of a company's supply chain including shipping or production; however, it is not reached its final destination.

• Reorder point

It indicates inventory quotas that determine recording schedules taking into future and current account demand along with lead times. 

• Safety stock

It is also known as buffer stock.

• Sales order

This term defines a transactional document that is sent to consumers after purchase and before completing the order fulfilled.

Purchase requisition and purchase order are simply interdepartmental forms which serve the purpose of handling the accounting and finances better. They bring in transparency along with setting of a defined process flow.

Let’s have a quick look about where these forms are placed with respect to the process flow:

Understanding The Basics Purchase Requisition and Purchase Order 

As seen in the above figure that once the purchase order is received it goes through approval process and based on the approval the purchase requisition is converted into purchase order.

Procurement management process involves purchase requisition and purchase order. Now that we know how PR and PO are important in the workflow, let’s understand few basic terms :

1. What is a purchase requisition?

In simple terms, purchase requisition is an internal document used by an employee to purchase goods or services on behalf of their firm. It is the formal intimation to let the purchase department know to start the purchasing process. It also serves as a ready reckoner to the finance department to co ordinate and verify basis this document.  

2. Who sends the purchase requisition?

It is first filled out by an employee who sees the need for that product or service.

3. What are the details in purchase requisition form?

An employee fills details like item name, description of goods, quantity, price, suggested vendor, etc

Here’s an example of a purchase requisition form:

4. Who receives the purchase requisition?

Once PR is raised, it is received either by department head or the purchase department.

5. What comes first: the PR or PO?

Purchase requisition comes first, a purchase order is issued by the buyer who makes sure they got exactly what they had ordered.

Now let’s quickly understand more about a PO:

1. What is a purchase order?

It is a document issued by a business purchasing department while placing an order with its supplier or vendor. It is a legally binding document which contains information such as price and agreed terms with the vendor or seller. If digitalized, it also provides excellent tracking function for any organization.

2. Who sends PO and what are the details contained in it?

A PO is issued by the purchase department and it contains details like purchase order date, product level, ship location, select vendor, bill location name, send mail to vendor, etc.

Here’s an example of a PO form:

3.Who receives the PO?

PO is received by the seller who then decides whether to fulfill the order or not. If he decides to fulfill the order, the purchaser sends payments at agreed price or at a later date as mentioned in the PO.

4. Who makes the payment against purchase order?

The purchaser makes the payment against the PO. Once the vendor delivers order along with an invoice, the purchasers finance department compares their invoice to the PO and makes sure that these two documents match with each other.

5. How can the process of  purchase requisition or purchase order be automated?

With TYASuite the entire process of purchase order management can be automated and these documents can be prepared in a jiffy.

With TYASuite supercharge your purchase workflows & streamline your purchase approvals from days to hours.