Maximizing benefits in selling the products is not only because of product quality but also with effective inventory management. Planning on how much stock to keep or informing the manufacturing sector to increase or decrease production is part of the process. Your inventory managers are also the gatekeepers who strategize to achieve the highest benefits with the least cost. However, risks are undeniably present even for this industry. Thus, managing the risks expertly to continue normal operations or using them as springboards to greater rewards is a mark of a top tier manager. So, handle the risks like a pro. And deal with the storm so that you can see a rainbow after that.
What is Inventory Risk Management?
Managing inventory risks deals with tackling problems that arise with storing or stored products. Whether the companies continue to struggle coming from low supply or they will have problems disposing of their commodities, managing these conditions is crucial in keeping the business alive.
Of Granaries and Gatekeepers
Famine is one great disaster because everybody is dependent on food. Before, you have granaries to store grains to have an adequate supply for use. Seasonal changes were one of the primary factors why storing was a strategy. And you have either government officials managing the reserves, or wealthy merchants handling the service. The obvious risk to the stocks was pests, as they creep in almost undetected. But ever since the granaries shifted from public use to private enterprise, you have lots of owners as gatekeepers. They manage the stock by either filling it to the brim or emptying it to control the prices. When risks arose, they compensate by buying shares, burning surplus, stage a robbery, negotiate with others, and many more. Inventory risk management was already at play, even in the early times. How much more today when you have businesses with their mega warehouses?
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6 Steps How to Do Inventory Risk Management
An empty warehouse or a stockroom filled with products with diminished values is a nightmare for any company. Not only is it a lost opportunity to maximize profits, but also a considerable cost to the storing process. Thus, any risk, whether big or small, deserves careful maneuvering. So follow the concise list below to handle obstacles effectively.
Step 1: Have an Accurate Inventory
Inventory risk management presupposes that you already have your inventory sheets ready. So make sure that you have an organized framework of maintaining spot checks. More so, doing a doublecheck on the inventory scheme will work for your benefit. There is nothing like accurate information as a basis for critical decisions.
Step 2: Keep Updated
Commodity value is subject to change within time. Basic economics and market changes also contribute to value volatility. If the manufacturing department steams up its production amid low consumer demand, then the prices of the goods will be lesser, which will have problems covering up storage expenses. Or there are changes with the global price of a specific commodity; then, you need to assess the stored items you have.
Step 3: Make an Analysis
Grasping general trends or pattern changes are crucial in creating managerial decisions. If your company uses its analytics team or you intend to hire third-party help, an analysis document is necessary to establish a guide for risk management procedures. More so, when potential obstacles are highly predictable, doing risk analysis will certainly help.
Step 4: Check the Supply Chain
You need to grab hold of the shipment schedules to know the number of supplies you will be receiving in a specific time. Plus, you also have to check whether the transport routes do not have any problems as delays will drastically affect your inventory. Thus, asking for detailed status reports about the supply chain is necessary, especially when specific risk management protocols demand changes in the process.
Step 5: Plan
Predicting possible risks demands meticulous planning for countermeasures. Whether you choose to fight or to flee, make sure that you thought about the process. Strategic plans are critical either in avoiding or confronting risks as long as you manage to push through with all limbs intact.
Step 6: Manage the Stock
If continual diminishing of commodity value gets the best in your industry, then you can hasten the selling process to maximize the present price. Moreover, if you see that the costs of your commodity are still low and storing them is still well under the budget, then wait for the right time to sell them. When the risk concerns more of having little proceeds, then you need to do inventory control.
Handling your supplies with utmost care is an integral part of the business. Your profit lies in the proper management of the stocks and executing unique approaches to risks. Any risk, if faced right, can turn to opportunities.