Inventory Systems
Inventory systems are designed to make inventory management easier. There are several inventory systems you can use, each with its pros and cons. Because each one is so distinct, you need to consider your inventory needs closely before choosing the right one for your business. We’ll go through three inventory systems and discuss their strengths and weaknesses:
Top and Bottom System
In the Top and Bottom System, you put limits on how high and low your inventory levels can go for each product. This means that when the number of a certain product gets too low, you instantly reorder it. The number of products you reorder can’t be higher than the maximum amount you set. So you always keep your product levels somewhere between the two extremes.
This inventory system is usually a great way to operate because it takes a lot of guesswork out of inventory management. You always have a target range you’re aiming for. However, you may need to adjust your minimum and maximum inventory levels from time to time, especially during Christmas or other big-selling seasons. If you use inventory management software, you can set up automatic reorder points. These save a lot of time because you won’t have to place all of the orders by hand; that will be done for you.
Backup System
The Backup System uses two main inventory stocks: a primary stock and a backup stock. When a product’s primary stock is depleted, it’s immediately reordered. While the new products are on their way to your warehouse, your company can use the backup stock to tide you over.
This inventory system requires a lot of planning to make sure your backup stock isn’t too big or too small. After all, backup stock is a collection of extra products that you don’t need until the rest of the products are gone. If this system is set up poorly, those extra products could be a waste of resources. If it’s done well, though, this could be a lean inventory system for your business.
Three-Tier System
This takes a different approach than the first two inventory systems. Basically, you group products into three tiers: one tier for high-cost products with long delivery times, a second tier for medium-cost products with somewhat shorter delivery times, and a third tier for low-cost products with short delivery times. When products in a specific tier get low, you can quickly tell how long it will take to order more of those products, how much they will cost, and how many you should order.
With this inventory system, you don’t have specific quotas of how many products to keep on hand. Instead, you have three general groupings that give you an idea of which products are most critical and difficult to obtain. It will probably take more work to keep this inventory system running smoothly, but it’s certainly possible if you use inventory management software to automate the reordering process and monitor inventory levels.
Fishbowl Inventory offers advanced inventory management features to make all three of these inventory systems work. Whichever inventory system is right for your company, you can count on Fishbowl to get the job done. Sign up for a free trial of Fishbowl today by clicking the button below.
