Why a manufacturing company fails to control Inventory Stocks?

Business Analyst | 02 October, 2019 (Wednesday)View 2081

Most of the manufacturing company specially RMG & Textile companies are facing Inventory Stock problem. Many companies getting bankruptcy due to over inventory stock. In this article, it will be discussed about why a manufacturing company fails to control the Inventory stock.

All material movements are not defined and recorded them accurately

Majority percent RMG company are managing inventory stock in traditional way. Because they have not identified each & every materials/products movements properly. Also, they are not recording each and every movement in real time accurately. As a result, inventory information is not correct. Therefore, Companies don’t know how much materials/products are

Really purchased?
Actually, used in production?
Ordered to suppliers?
Received from suppliers?
Not received from suppliers?
Return to suppliers?
Issue to production?
Return to production? etc.

Also don’t know

Are suppliers delivering the materials/products on time or not?
What are the suppliers’ quality performance?
What are rejected percentage of materials/products?
What are the current situations of materials/products? etc.

Inventory stocks are not counted regularly

Most of the companies are not counting inventory stocks periodically. As a result, they don’t have actual information of how much materials/products are

Available in stock?
Usable from stock?
Not usable from stock?

Also, it not possible to know

What is the value (in terms of money) of stock?
Are Inventory stocks increasing or decreasing day by day?
Is company utilizing the material/products properly or not? Etc.

Inventory stock are not categorized properly

Companies are not categorizing the inventory stock based on quantity & value. As a result, companies don’t know which inventory stocks are

Less in quantity but have high in value
More in quantity but have low in value

At end the, companies fail to prioritize the inventory stocks.

No good inventory control team

Companies don’t have good inventory control team. Therefore, companies don’t know

What are the main reasons of increasing inventory stocks?
What is the status of current inventory stocks?
What are daily, monthly & yearly inventory stock?
Which Items have high inventory stock and what it’s value in terms of money? Etc.

Same materials/products are recorded by different names

Materials/products specifications are not standardized properly. There is no standard rule to define materials/products specifications and different people define same materials/products in different ways in companies. Therefore, same materials/products are stored in inventory by different names. So, it’s not possible to find it by a specific name. So, it not possible to find the materials/products when they are needed. As a result, materials/products are purchased or produced again and inventory stocks are increased.

Store are not organized properly

Stores are not defined by zone, location, rack properly. Materials/products are stored haphazardly. So, it not possible to find the materials/products when they are needed. At the end materials/products are purchased or produced again and inventory stocks are increased.

No ERP software to records all material movements

Companies are not using ERP software to records all materials/products movements. They are using paper or excel based system. Although some are using ERP software, but those are not integrated with their warehousing processes and system fail to provide accurate & real time inventory reports. At the end, inventory stocks are not counted properly and increased.

Final thoughts

If a company fails to control its inventory stock, its’ profit margin will be low day by day and got bankrupt. At the end, it will be kickout from market. So, inventory is the heart of manufacturing companies. To control inventory stocks, a company should record each & every materials/products movements accurately, check inventory stock periodically, organized store properly, categorized based on quantity & value and use ERP software to organized all inventory information.