Inventory management is more than just counting the number of items you have on your shelves. Especially since the number of items you have is almost never equal to the number of items you have available to sell.
There is more than one way to count your inventory. The physical number of a product you have is just one number. However, just because it is on the shelf does not mean it is available to take off of the shelf. It could be reserved, or allocated, for sales orders already.
On-Hand vs Available
On-hand quantities are different from Available quantities. For example, if a certain amount of your products have already been reserved for a customer, you don’t want to count them that as available stock. They are not available once you’ve sold them, even if they have not physically been picked yet. In this way, the number of on-hand items can be different than the number of available items in your warehouses.
Eventually you will need to fulfill customer sales orders (or pick orders) that you already have awaiting fulfillment, and you need to make sure that there are enough of your product to fulfill those orders. An issue could arise. If you go by what you are counting on the shelf every time, you get an order you will sell more than you have. When this happens, you could cause needless delays in delivery of the sold products to the customers you sold them to.
Companies who aren’t able to somehow count both the on-hand inventory and the available inventory find themselves in a constant scramble to fulfill orders on time. This is a big reason that organizations use a warehouse management system (WMS) or inventory management software (IMS) application. Spreadsheets won’t do the trick.
Allocated Inventory
Available inventory is the inventory that is open to use and sell. It’s not on an order. In other words, it is not allocated. Inventory that has already been designated for an order is allocated. This is a separate number that is useful to keep track of. Knowing how much of your product is allocated at any given time can be used for reporting and making informed decisions in your operations.
For example, if almost all of your inventory in stock is allocated to orders, you might increase your purchase orders to replenish those products even before they’re physically gone. With an inventory management system that provides for allocation, and reporting and analysis of those allocations, managers can see beyond what they have on their shelves at any given time. They can see all the true numbers of their inventory. This kind of visibility can’t come from tracking via pen and paper or spreadsheets.
Not to mention, with a WMS or IMS, when it’s time to pick the allocated stock, directed picking on mobile devices takes employees straight the right location instead of hunting for the specific lot or serials numbers among products that all look alike from a distance. That’s why we encourage people to try the allocation feature on our app.
On-hand vs Available vs On-order
To know how much of a product your really have, you’ll want to take into account the inventory that you’ve already ordered but has not yet been received into your warehouse. Just because you haven’t received the items you have ordered does not mean you should order more of that item. If you did that, then you will end up with too much quantity. Once again you can see that just counting the number of items you have on hand at any given time is just a limited and flawed piece of information. Unfortunately, without an inventory software, knowing all the real numbers can be a challenge.
In a true inventory management system, you will track several numbers for each product. An inventory management system should track the on hand quantity, the available quantity, any on order quantity. These numbers interplay and affect each other. They should be calculated automatically by the system so that you can be making decisions on how much you can sell and how much you should order at any given time.
Conclusion
Inventory is more than just one number. That is the point of an inventory management software system. It does all of the work for you. What you have on-hand, what’s on order, and what’s allocated are three separate numbers to your inventory. With all three numbers updated in real-time across your PC and mobile devices, you can manage your inventory, track your products, and track the movement. This leads to an all-around improvement in your operations.
With our software, you’ll be saving on labor costs and improving the satisfaction of your customers.