How to Track Raw Materials: A Quick Guide
The inventory of raw materials in your business refers to the supplies of fundamental resources that are eventually needed to produce a finished good.
Basic examples of raw materials are coal, oil, wood, plastic, and steel. However, components that have already been made or altered by a supplier may also be used as raw materials, provided that they are utilized in the production of another final commodity.
Raw materials can be divided into two categories: direct and indirect. Your final product and direct materials are directly related. Both stone and steel are direct raw materials, for instance, if you were to construct a garden with them. However, the sealer you used to the statue to make it watertight and finished is a bit less obvious—and considered an indirect material.
Why is keeping track of raw materials so crucial?
Keeping track of raw materials is crucial to efficient inventory management, particularly if your company uses them to make final products that you sell to clients. Stockouts can be expensive if you don’t keep accurate track of your raw supplies.In addition, in the event that your raw material supply runs out, there’s a chance that your clients may discover another supplier who can meet their needs more quickly.
For companies that need to track expensive, difficult-to-find, or slow-to-ship items that could be impossible to find locally—even at exorbitant prices—tracking raw materials is especially crucial. Your best option is to implement a raw materials inventory management system to maintain your company’s profitability and productivity.
Challenges of raw materials tracking
There are a few typical problems with raw material inventory tracking that are worth mentioning, even though every company will inevitably have different difficulties.Supply chain unpredictability
One of the difficulties in managing raw materials is establishing strict inventory minimums and reordering guidelines in the face of an unpredictable supply chain that can disrupt even the most well-run company. Your best bet is to discover and onboard backup suppliers in advance of turbulent times, and to cushion your safety stock within reason. In this manner, they will be prepared to help whenever you need them.Inadequate adherence by workers
Getting employees on board with tracking raw supplies is another big problem. After all, the effectiveness of your inventory management plan depends on the effort put in by people charged with carrying it out.The simplest method to deal with this issue is to select the best course of action, then provide the necessary resources and training to support each employee who is expected to assist.An excessive amount of time was lost
Lastly, some companies discover that keeping track of raw materials takes a lot of effort. This is nearly always the result of an organization using an inventory spreadsheet or manual inventory tracking. Thankfully, features like customisable reports, barcode and QR code scanning, and low stock alerts allow inventory apps and inventory management software to automate even the most laborious inventory processes.Catalog what raw materials your business needs
Without a clear understanding of your company’s requirements, managing any kind of inventory is hard. It is necessary to determine what raw materials you truly require before you begin inventory tracking. Make a detailed inventory of all the raw materials your business requires to make final goods, both direct and indirect. This may require some time. Remember to add supplies you only seldom use, particularly if you’ll need to place special orders for those things in order to meet demands.Develop a perpetual inventory system
If at all feasible, your company ought to think about maintaining a perpetual inventory in place of tangible inventory. In other words, each time a raw material is acquired or used up, your business will update its inventory.
Although this method of inventory management may seem complicated, it doesn’t have to take all day. Using barcodes and QR codes, your staff can “check in” and “check out” things fast with the help of the correct current inventory management systems. Goods order inventory and similar inventory solutions let your team create bespoke barcodes and QR code levels for unlabeled items, and they also let you utilize a phone or tablet as a scanner.- Understand inventory control You may want to reconsider your inventory control strategy in addition to creating your list of raw materials and thinking about a perpetual inventory system.
- Count inventory physically from time to time You won’t have to keep counting all the raw materials on your storage shelves if you use a perpetual inventory monitoring system, which is one of its main selling benefits. However, we still advise periodically conducting a physical inventory count, or at the very least, a cycle count.
How should raw materials be tracked?
The distinctive components of each organization should determine the development of a unique raw materials management plan, but these five phases provide a great starting point for managing your raw material inventory.The key to inventory control is striking the ideal balance between maintaining low inventory costs and placing enough orders to fulfill orders from clients quickly. If you place an excessive amount of orders, you will waste money on raw materials that you do not require. If you place an order for too little, you incur the possibility of work stoppages and stockouts, which can seriously harm your company’s reputation and financial performance.
About GOIS
GOIS is an inventory management solution that helps you track, manage, and organize your inventory—from any device, in any location. We’re an easy-to-use inventory software that’s perfect for small businesses. GOIS builds inventory tracking seamlessly into your workday so you can save time and money, satisfy your customers, and help your business succeed. With GOIS, you can track inventory, supplies, parts, tools, assets like equipment and machinery, and anything else that matters to your business. It comes equipped with smart features like barcoding & QR coding, low stock alerts, customizable folders, data-rich reporting, and much more. Best of all, you can update inventory in real time, whether you’re on the job, in the warehouse, or on the go. Request a Demo with GOIS Today.Tag: