Inventory Accounting: How To Successfully Manage Your Inventory

Barcodes can be found on almost anything these days, from products at the grocery store to educational books at the university shop. They have many uses, including identifying products, ensuring improved inventory control, and scanning prices. What exactly is a barcode? Here we will delve a little bit deeper into what a barcode is and what it means, the different types of barcodes, their parts, and how they are used. What Does a Barcode Mean? One of the common challenges people have with barcodes is understanding what they are and what they mean. At its simplest, a barcode is a machine-readable representation of data. This data can be used to identify and track objects with a barcode reader.  Because barcodes can be read by machines, they can be automatically entered into a database to track inventory and inventory management. This can save businesses money by preventing them from overstocking products or accidentally selling items for less than they are worth. Types of Barcodes The most common type of barcode is the Universal Product Code or UPC. This type of barcode is used on products at the grocery store. Another common type of barcode is the ISBN, which uses 13 digits and can be tracked online without requiring a barcode scanner. Next, there are GS1 barcodes. What is a GS1 barcode? These barcodes are similar to UPC barcodes, but they are primarily used to track inventory and prices. GS1 actually stands for “global standards one,” which is an internationally recognized barcode standard for goods.  This type of barcode can be found on products at the grocery store, construction materials, books, and many other shippable items. Finally, there are QR codes. QR codes are a newer type of two-dimensional barcode that has become more popular over the years. They can be used to store information about a product or website on various surfaces, including stickers, posters, and even t-shirts that you can wear.  QR codes can quickly be scanned by a smartphone to instantly access anything on the internet, from company websites to restaurant menus. As you can see, all types of barcodes have a purpose in business and deciding on which one to use ultimately depends on the way your business operates. Parts of a Barcode Barcodes have two main parts: the human-readable part and the machine-readable part. The human-readable part is the series of numbers or letters that you can see. This part is used to identify the product. The machine-readable part is the series of black and white bars that the machine reads. This part tells the machine what the product is and how it should be tracked. Uses of Barcode Technology So what is a barcode used for? Barcode scanners and technology can be used in a variety of ways. The most common use is helping businesses with inventory balance, tracking goods, and querying the database for product prices on the spot.  This can be helpful for retail stores to prevent overstocking or selling below market price. Barcodes can also be used to track library books, products at the grocery store, and other items. However, some types of barcodes, such as QR barcodes, can also be used for marketing purposes. Since they are 2D, these barcodes can be printed on signage, mugs, hats, and all sorts of business marketing materials. Benefits of Barcode Technology There are several benefits of using barcode technology. One is that it can save retail stores time and money by preventing them from overstocking products, miscalculating inventory, or accidentally selling items for less than they are worth. Another benefit is that barcodes can be used to track a variety of objects, from college books to products at the grocery store, with barcode scanners. This can be helpful for people who are trying to keep track of their belongings and for retail stores using it for part management and inventory control. Final Thoughts A barcode is a machine-readable representation of data used to identify and track objects. They can be found in almost anything, from products at the grocery store to library books. Barcodes can save businesses time and money by preventing them from accumulating too much inventory, miscalculating, and wasting precious resources. Additionally, barcodes can be used to track a variety of products and objects. This can be helpful for people who need to keep track of their belongings or for businesses that need inventory tracking. The uses of barcode technology are endless and will continue to evolve over the years with the adoption of QR code technology by the average smartphone user. Now that you know what a barcode is, you will know exactly how they work next time your shop at a retail store or use the postal service.

Amazon is a behemoth of a company. It dominates the online retail market and shows no signs of slowing down. But what many people don't know is that Amazon's success relies heavily on its distribution network.  This system consists of many parts, all of which work together to ensure speedy and accurate delivery of products to customers. In this article, we'll take a look behind the scenes at how inventory management at Amazon works. We'll examine the segments of this system and how they all work together to make Amazon the giant it is today! The Importance of Amazon’s Inventory Management  Amazon has made a fortune by being extremely efficient in its inventory management. It has come a long way since it opened its first warehouses in 1997, both in terms of storage space and supply chain logistics. Although the company now owns storage space of over 300 million square feet in the United States, it has also made steps toward a simpler, just-in-time inventory system. This means Amazon orders products from suppliers when they are needed to fill customer orders. Owing to this approach, Amazon can avoid the cost of storing excess inventory. Moreover, the products are less likely to become outdated or damaged while sitting on shelves. Of course, this system requires a high degree of coordination between Amazon and its suppliers. But, by carefully managing its inventory, Amazon has been able to achieve unprecedented levels of efficiency and profitability. How Does Amazon Manage Its Inventory  When Jeff Bezos founded Amazon in 1994, he had a simple mission: To be Earth's most customer-centric company. To achieve this goal, the people at Amazon have always been willing to experiment and take risks, whether it's developing new technologies like the Kindle or reinventing the way we shop with Prime.  Behind the Amazon inventory management system lies a simple insight that eCommerce customers want their goods as quickly as possible and to get as close as they can to the experience of shopping at a physical store. To help them achieve that, Amazon uses modern tech throughout the process, from online shopping to the last stages of delivery. The company has a team of data scientists who analyze customer buying patterns and use that information to forecast future demand. The goal is to maintain a good inventory balance, meaning get exactly the right amount of stock. In turn, this would reduce waste and ensure that the products customers want are always available.  Amazon uses technology to keep track of its inventory. It boasts GPS-enabled devices that scan items as they are loaded onto trucks and uses RFID tags to track items as they move through warehouses. This allows the team to know exactly where each item is at all times, so they can quickly find and ship it to the customer who ordered it.  State-of-the-art logistics ensure that products are delivered efficiently to Amazon warehouses. In the delivery of goods to an Amazon fulfillment center, the use of its custom app Relay streamlines the process for both the warehouse and the delivery vehicles. Another big part of Amazon's warehouse management system is its use of robots and artificial intelligence. With more than 520,000 robots in their fulfillment centers around the world, Amazon teams get considerable help from these robots in moving inventory around and loading it onto trucks for shipping. In addition to physical robots, Amazon relies heavily on artificial intelligence to help manage its inventory. For example, the company uses AI-powered algorithms to predict which items are likely to sell well in the future and stock accordingly.  The company became the third approved provider of drone delivery services in the US. This innovation is meant to give Amazon an advantage over its competitors by lowering the costs of last-mile delivery, which is often critical in terms of the resources it requires.  Thanks to these efforts, Amazon is able to keep its inventory well-stocked and fulfill customer orders quickly and efficiently.  Amazon Facilities and Shipment Process Facilities play a vital role in this system, as there are currently 305 Amazon fulfillment warehouses. These are giant storage spaces that hold inventory and are connected to Amazon’s distribution network. When customers order items from Amazon, they are sent from the nearest fulfillment center. The company also has over a thousand distribution centers, which are used to store products before they are sent to fulfillment centers or customers.  Although the fulfillment center is at the heart of Amazon’s operations, there are five facility types that make up the Amazon distribution network. We’ll take a quick look at what they are and what part they play in Amazon’s order management. Cross-Dock Center Amazon cross-dock centers are basically large warehouses where inventory is sorted and then shipped out to fulfillment centers. The term "cross-docking" comes from the fact that these facilities typically have loading docks on both sides of the building so that inbound and outbound shipments can be loaded and unloaded. As the first stop in Amazon’s warehouse system, cross-dock centers have a much smaller staff than traditional warehouses since there is no need for employees to pick and pack orders. Instead, the focus is on rapidly and accurately sorting inventory as it arrives so that it can be quickly reloaded for shipment to its final destination. Fulfillment Center The Amazon fulfillment center network is one of the most important pieces of infrastructure in the company's business model. By stocking inventory in large warehouses and using sophisticated software to track sales and trends, Amazon was able to create one of the best inventory management systems on the market.  Each Amazon fulfillment warehouse stores merchandise until it is sold. When an order is placed, the appropriate item is picked off the shelf and shipped to the customer.  As Amazon’s average fulfillment center is 800,000 square feet, the company uses a complex system of barcodes and scanners to keep track of all the items. When an item arrives at a fulfillment center, it is assigned a barcode that is scanned into the system. This allows Amazon to track the location of every single item in its inventory at all times. Sortation Centers Amazon sortation centers are distribution facilities where orders are sorted by destination ZIP code and then shipped further. At a sortation center, workers scan and sort customer orders before loading them onto trucks for delivery. By sorting orders according to their destination ZIP code, Amazon is able to reduce shipping times and costs.  Delivery Stations Delivery stations are also an essential part of Amazon’s warehouse management structure, as the last-mile delivery that they serve contributes to cutting delivery costs.  These delivery stations are small warehouses that package and ship orders to customers. Amazon workers at these facilities pick, pack, and ship customer orders. Some delivery stations also serve as sorting centers, where packages are sorted by destination before being sent out for delivery.  Amazon Prime Now  Amazon Prime Now is a service that offers ultra-fast delivery of items from local stores and restaurants. It is currently available in the United States, the UK, and select markets across the world. In each city, Amazon has established so-called "Prime Now hubs," which are staffed with drivers and personnel who fulfill orders placed through the Prime Now app.  How Do Fulfillment Centers Work  A key part of Amazon’s eCommerce inventory management strategy, the fulfillment center network ensures the speedy service Amazon customers have come to expect. However, these centers don’t function the same way you would guess.  Most businesses designate areas of their storage facilities for certain types of goods, let’s say, apparel or tech. But because of the enormous space that Amazon’s warehouses occupy, this wouldn’t be efficient at all. Instead, as soon as the commodity arrives at the fulfillment center, it is placed on the first available shelf. Both the item and the shelf barcode are scanned and entered into the system so the item could be located.  When something needs to be picked up for shipment, it’s usually time for robots to assist. The robot waits for the Amazon employee at the designated shelf, its job being to take the item and drop it off for shipment. This saves time, as workers don’t have to cart from the shelf to the shipment area.  How Can You Benefit From Amazon’s Warehouse Management? Anyone who has ever shopped on Amazon knows that the company is an eCommerce powerhouse. But what does this mean for you, the customer? Well, there are certain benefits to Amazon's efficient warehouse management. For example, you can often find great deals on items that are in stock and ready to ship. Moreover, Amazon Business is one of the prime wholesale websites where you can find supplies in bulk and pay less, especially if you're stocking up for your company.  There are also advantages if you’re using Amazon Marketplace to sell your products. You can benefit from Amazon’s FBA inventory management service. The Fulfillment by Amazon program takes care of the entire process from order to delivery. The only thing left to do is optimize the keyword research for your product and push it up Amazon Marketplace rankings. Then sit back and watch your sales volume go through the roof. Bottom Line Amazon has become synonymous with eCommerce for good reason; the company has revolutionized the way we shop. Certainly, a big part of Amazon's success is the efficient management of its massive inventory. By leveraging a combination of fulfillment centers, robots, and artificial intelligence, Amazon is able to keep track of every single item in its inventory at all times and ensure that popular items are always in stock.

Inventory control is the main goal of part management. Any company that works with physical assets needs to stay organized to function properly, and part management is followed by additional costs. As such, in order to run a successful manufacturing or service/repair operation, it’s necessary to have the right amount of resources at the right time, and that’s where an organized spare part management system comes in. Effective Spare Parts Management An effective parts management system will allow you to: Know what parts and components are required for each product or service Track where each part or component is located Determine how many of each part or component you need Control inventory levels for each part or component Minimize waste and inventory costs As you can see, spare parts management can reduce downtime, as it can eliminate any inefficiencies in your daily operations. It can also increase customer satisfaction by helping you provide fast service and reduce your overhead costs.  Best Practices for Spare Parts Management There are many benefits to integrating an effective parts management system in your business, and that’s why we’ll explore some of the ways to optimize it further for your organization. Identifying Critical Components Any operation wanting to implement successful parts management needs to identify what components are essential for their business to run without interruption.  You can do this by looking at factors such as downtime costs, frequency of failures, lead times, and conducting an ABC analysis. By knowing which parts are critical, you can ensure they’re always in stock and available in the event of an emergency. Once you’ve identified the critical components, you can focus on your efforts to improve the availability of those components. This may involve stocking more inventory, developing better supplier relationships, or implementing just-in-time delivery.  ABC analysis is a method of categorizing items according to their consumption value, which represents the value of the item over a specified period of time.  Items that are considered essential for the operation and have the highest consumption value are classified as "A" items, while those that are less critical are classified as "B" or "C" items.  This type of analysis can be particularly helpful in spare parts management, as it allows managers to focus on keeping a stock of essential items while minimizing the cost of less important ones.  Applying such practice to your part inventory management system does come with additional costs, but it can provide peace of mind and safeguard against unexpected disruptions.  Inventory Volume and Sawtooth Diagrams You can graphically contextualize when you need to order new parts by using sawtooth diagrams. In the example below, you have inventory levels of a certain part represented on a y-axis and time on an x-axis.  Each peak is the maximum inventory capacity for that part, and the distance between them is the time between each shipment. However, the lead time determines when you need to reorder the part before it’s gone from your inventory. This approach is easily implemented in your business operations, but before applying it, you’ll need to determine the maximum and minimum inventory levels needed for each part in the inventory.  Maintain a Bill of Materials Efficient spare parts management greatly depends on having an up-to-date bill of materials by providing a clear and concise list of all the parts you need.  This can help reduce the time needed to find and order the correct parts, as well as prevent ordering unnecessary parts. Economic Order Quantity The economic order quantity is a mathematical formula that helps businesses determine how much of a product to order at a time in order to minimize the costs of inventory.  The EOQ takes into account the costs of ordering, holding, and spoilage of inventory. Determining the EOQ is the perfect way for businesses to find the ideal amount of spare parts to order, and it can also be applied to any kind of product. Work Order Process Standardization  Standardizing work order processes within your organization is a great way to improve your parts inventory management. Once implemented, the process needs to be precise and easy to follow.  Before implementing your own work order process, consider the following:  How difficult is it to obtain parts without a work order? How do you identify employees that don’t follow procedure and lead to imprecise inventory tracking? Is your work order flexible enough so that high-priority work orders can be focused on? Can you process work and purchase orders on time to avoid waiting for delivery? You should have a system where each spare part is associated with a work order. Other departments need to have an overview of all work orders for the sake of efficient spare parts planning. Inventory Control - Employee Training Maintaining an accurate overview of your inventory will depend on how well you train your employees in regard to spare parts management procedures. That’s why it’s important to invest enough time in proper inventory management for employees who handle spare parts. There are plenty of resources online, including seminars and training programs. It’s up to you as a business owner to choose one that covers the basic procedures and software solutions you wish to implement.  Taking Stock Of Lead Time An essential part of spare part management is to know your suppliers’ lead times. This is essential for inventory managers, as it allows them to plan out what parts they need to stock and in what volume.  We’ve already mentioned the importance of keeping stock of critical spare parts, as not having them stocked can have a significant financial impact on your business. You also don’t have to keep non-critical parts in reserve, as having too much inventory stock can incur additional costs. Managing inventory effectively includes avoiding expensive shipping options and establishing regular order times based on part expenditure.  Sometimes, managing your spare parts inventory will require you to order parts and components from other manufacturers, as your main supplier might not be able to make the shipment. Therefore, keeping a list of substitute suppliers is necessary to reduce wait time for the manufacturing and maintenance departments.  Risk Calculation Equipment malfunctions and machine overhauls are unavoidable, and that’s why the parts warehouse inventory needs to account for the risk of downtime. An effective part management system can help reduce downtime by ensuring the correct parts are available when needed. However, it’s easy to overcompensate and create unwarranted expenses.  As such, it's necessary to maintain inventory adequately while also minimizing the amount of money tied up in it. This can be difficult for small businesses to budget correctly, and it's important to take into account the amount of risk associated with each item in stock. For example, a business might have a critical piece of equipment that needs a particular set of parts to function. If those parts aren’t readily available, the company could be at risk of losing money or, worse, shutting down entirely. The parts management plan should account for this, and in this case, it would be important to have a large inventory of spare parts for the critical piece of equipment. However, if the business is able to order the parts as needed, it would be less important to maintain a large inventory of spares, especially non-critical ones.  Investing in a Spare Parts Management Software A computerized maintenance management system - CMMS - can help enforce some of the best spare parts management practices. For example, a CMMS can ensure that parts are ordered and received in a timely manner, that they’re properly stocked and tracked, and that they’re properly used and maintained.  Additionally, a CMMS can help identify potential problems with spare parts management and address them before they become larger issues. One handy practice for parts management is known as “just in time,” or JIT. This strategy calls for having only the necessary parts on hand and not keeping any more inventory than necessary. This can be difficult to do without a computerized system. A CMMS can help managers see which parts are being used and predict when they’ll need to be replaced. This allows them to order just enough parts to meet the demand, rather than making approximations and ordering too many or too few. Overall, efficient inventory management software can help maintain inventory accuracy, confirm stock locations, maintain stock levels, and ensure effective management processes. Limiting Access - Inventory Control System In order to maintain an efficient spare parts management process and avoid inventory inaccuracies, make sure that only parts department employees have access to the inventory. Consider the following practices to implement better security measures:  Having parts inventories limited to authorized employees Implementing physical security measures Installing security camera systems Instructing employees on the proper procedures and conducting regular reviews of essential spare parts Fortunately, smart security systems are becoming quite popular and affordable. These security measures can help deter theft, protect inventory from damage, and ensure that only authorized personnel has access to parts.  Closing Thoughts Spare parts inventory management can be a complex and time-consuming task. However, it’s a crucial part of keeping a business running smoothly and avoiding costly downtime.  By following the tips and best practices outlined in this article, you can ensure that your spare parts are managed effectively and efficiently.