Multiple Dimensions of Inventory Management
By Mark Stair

Inventory management can be simple or complicated. As you want to manage and control more aspects of inventory the complexity can rise quickly. Let’s give a few examples from simple (no) inventory management to the most complete and complex inventory management.

At the beginning spectrum is no inventory management. Some people wonder how a business can operate without inventory management, but if the business is small and simple enough, no inventory management might be acceptable (I’m not an accountant, so this is just my view). For example, let’s say a small business has one location for all the parts and it’s in the same office. Sometimes it’s just as easy to go see if a part is in the warehouse and trying to manage the inventory accurately. I have been amazed at the intuitive knowledge of some business owners or employees of what they have in stock. We have a number of customers that know immediately if a piece of equipment is available. In this scenario, having a system to manage inventory may add a level of complexity that the customer doesn’t need. For our software, customers can ignore inventory tracking while still achieving all the other benefits. One downside to consider is that a lot of the knowledge is held by one or two key people or requires someone to go into the warehouse every time an order or proposal is needed. Another downside is that the business would not have good valuation of their inventory for accounting purposes. However, it’s easy to manage.

The next level is accurate inventory management for a single location and with no serial number tracking. In this case, the business wants key people to know the inventory counts of equipment, parts and items. This information is useful for sales people creating proposals, dispatch people creating service orders, technicians adding or selecting parts to an order, and accounting people to know the value of the inventory. In addition, the software system knows when items need to be ordered for proposals or orders so that Purchase Orders can be generated to the vendors.

The next level of inventory management is multiple warehouse locations. A company may grow to multiple warehouse locations, or the company wants to segregate a different class of equipment such as refurbished or return parts so they don’t get sold as new. Another use is to track inventory in a technician truck, utilizing the truck as a warehouse. This allows the business to know what inventory moves out of the warehouse an into the technician vehicles. This level of inventory management requires another level of management and control. A software solution that handles multiple warehouses is essential to handle this level of inventory management. Warehouse tracking can get complicated as you need to track movement between warehouses, where the parts come from when going to an order, and accurate inventory tracking for each warehouse.

The next level of inventory management is serial number tracking. This is a critical feature for customers that are dealing with high-end equipment or software to track registration or license codes. Some industries require this information to be tracked accurately on behalf of the customer. Serial number tracking can get complicated also because if you add multiple quantities of an item, it is really many unique items. Sometimes you want to show one line item on the order or proposal with quantity 10 and in other cases you want to show all the detailed serial numbers on the order. The software system needs to handle these different types of scenarios. In addition, the system should allow search and tracking of the serial numbers so you can quickly find specific serial numbers and which customers and orders have these parts.

The top level of inventory management includes all inventory aspects with warehouse management and serial number tracking. You need a software solution that has these capabilities, but is still easy to use.

A cool and extreme use of warehouses: We have a number of customers that utilize a large number of subcontractors to handle nationwide service. One customer treats each subcontractor as a warehouse and they track all parts and equipment sent to the subcontractor and used on work orders. For example, if 3 items are sent to a subcontractor, but they only use 2 of these items on an immediate job, they hold the 3 item for a future job. By tracking inventory at each subcontractor site they can reduce sending items back to the main office if they think it may be used again later.

High 5 Software’s SME product has great inventory management to handle unlimited warehouses as well as serial number tracking. Although inventory can get complex, SME keeps it easy to use.