Top Inventory Management Practices for Your FMCG

FMCG or the fast-moving consumer goods industry needs a robust inventory management system to deliver quality products to customers at the right time. FMCG has a short life, so the effectiveness of the inventory management system plays a crucial role in determining the success of the industry. FMCG needs strong inventory management support that is augmented with technology and automation.???

Here are the top FMCG inventory practices you must know:?

1.Economic order quantity.

Economic order quantity, or EOQ, is a defining rule that determines the order quantity a supply chain business needs to purchase for its inventory. It helps to ensure that the correct amount of inventory is ordered per batch so the company does not have to make orders frequently and adjust space. For determining the economic order quantity, you need to look into a set of variables like total costs of production, demand rate, and other factors.

?2. Minimum order quantity.

For suppliers, minimum order quantity (MOQ) is an important factor that helps to retain stable cash flow. It is the smallest amount of stock a supplier is willing to sell. The supplier won't sell the inventory if you don't have the money to buy the minimum stock.?

MOQ retains profit margins for both retailers and suppliers. It will enhance security in cash flow and reduce freight costs. Retailers will get the inventories at a minimum price and it helps suppliers reduce their inventory management trouble.????

3.?ABC Inventory Analysis

ABC analysis (Always Better Control Method) determines the value of the inventory by looking into the impact it makes on business. ABC analysis helps simplify work for inventory managers.?

• Category A - Goods that have the highest value and are given special care and storage (in terms of annual consumption)
• Category B - Goods that have a medium consumption rate. These are not as important as Category A.?
• Category C - Goods that have the lowest consumption value.?

It helps to:

• Streamline pricing
• Boost inventory optimization
• Enhances inventory forecasting
• Facilitates strategic resource allocation
• Manages product lifecycle
• Reduces storage expenses
• Better scope for negotiation

4.?Just-in-time inventory management.

An exact prediction of customers' requirements is necessary to replenish warehouses with products that are in demand. Stockpiling in warehouses is always a challenge. It consumes money and storage space and makes it difficult to control defect rates. However, Just-In-Time Inventory Management is an effective strategy to monitor actual customer demand and eliminate surplus products with an expiry date.???

5. Safety stock inventory, Buffer Stock & Anticipatory Stock

Exploring the possibilities in safety stock, buffer stock, or anticipated stock can stop you from going out of stock. Let's see how it can help us deal with the various stock crisis:

• Safety stocks help you bring the amount of inventory needed to prevent stock outs and save you from demand uncertainty and lead time uncertainty.?
• Buffer stocks and safety stocks are almost similar. Both are surplus inventories maintained to mitigate unprecedented fluctuations in demand. Specifically, buffer stocks protect your customer from disruptions in delivery.?
• Anticipatory stock is also surplus inventory. But instead of compensating for uncertainty or shortfall in demand, it is all about preparing for seasonal or festival sales.?

6. FIFO & LIFO Warehousing Technique?

• The First-In-First-Out inventory management system is as simple as it sounds. The products that come first to your warehouse leave first considering their expiry date or shelf life.
• The Last-In-First-Out inventory management system is recommended if you have non-perishable products with a longer shelf life. You can easily prioritize the last approached inventory according to the demand value

?Manage Your Inventories to Augment Your Business?

As the time demands high operational capability and increased visibility into the supply chain system, it is crucial to integrate technology-driven inventory management strategies to stimulate growth. It's time to shift our focus from the traditional linear supply chain model and adopt a new supply chain model that allows organizations to be more responsive and agile to survive in the digital race.