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A Guide to Manufacturing Inventory Management: What You Need to Know

plastic water bottles on a conveyor belt

Manufacturing businesses are key to the successful operation of the supply chain. So it makes sense that managing inventory control properly is essential to the success of any manufacturing plant or facility. If you’re in the manufacturing industry and are unfamiliar with what constitutes proper inventory management, don’t worry – we’ve got you covered! From understanding the importance of manufacturing inventory management and developing processes to using inventory management software, this guide will provide all the essential information on how to optimize your operations for better business performance.

Importance of Manufacturing Inventory Management

The success of any manufacturing company starts with implementing a good inventory management system. Warehoused inventory costs, whether in the form of raw materials or finished goods, can account for up to 80 percent of a company’s assets. Properly managing those assets helps ensure that production runs and orders are filled on time and on budget to meet customer demand. Inventory tracking also allows managers to make informed decisions on when it’s time to order more materials or begin production runs for new purchase orders.

When it comes to the manufacturing inventory management process, the goal is to strike a balance between having enough stock on hand in case of unexpected demand and avoiding overstocking and tying up too much capital in unsold goods. To help managers achieve this balance, there are several tools and best practices that can be used to track inventory and plan for the future. Let’s first take a look at the different manufacturing inventory types that most manufacturers use.

3 Types of Manufacturing Inventory

Manufacturers use three different types of inventory in their operations: raw materials, work-in-progress (WIP), and finished goods.

raw materials in a warehouse

Raw Materials:

Raw materials are the base components needed to produce a final product. These items can include metals, plastics, fabric, paint, chemicals, and other elements depending on the type of product being produced.


Work-in-progress (WIP) inventory includes the partially completed products that are still in the production process. This type of inventory typically consists of components, subassemblies, and other unfinished items that have yet to be finished.

Finished Goods:

Finished goods are completed products that are ready to be sold. This type of inventory includes any items that have been completed and passed quality control inspections.

By tracking these three types of inventory, manufacturers can ensure they are always able to meet customer demands while avoiding unnecessary excess stock or shortages.
forklift moving a pallet of inventoryTypes of Inventory Management for Manufacturing Companies

Once manufacturers have access to the necessary inventory data, there are several ways to manage their SKUs effectively.

Just-In-Time (JIT)

One of the most popular approaches is just-in-time (JIT) inventory management, which focuses on inventory control to minimize costs and optimize production runs. This type of manufacturing inventory management system requires closely monitoring demand trends and ordering raw materials just before they are needed for production.


Another popular method is ABC inventory management, which classifies items into three categories based on estimated demand:

    • A-items (high priority/demand)

    • B-items (moderate demand)

    • C-items (low priority/demand)

This system helps managers prioritize their purchasing decisions more effectively.


Finally, lean manufacturing principles can be applied to inventory management as well. This approach emphasizes the need for flexibility, efficiency, and waste reduction to ensure profitability. By eliminating excess inventory and streamlining processes, manufacturers can create a more efficient production system that focuses on meeting customer needs quickly and with high quality.

Overall, there is no one-size-fits-all solution for manufacturing inventory management. Manufacturers should carefully consider their specific needs and choose the system that best meets their goals. By understanding the different types of inventory management systems available, they can ensure they are always making the most cost-effective decisions possible while avoiding unnecessary overhead costs.

Determining a Manufacturing Inventory Replenishment Policy

Having an accurate system for inventory control is essential for manufacturing operations. Without it, managers run the risk of over- or under-stocking their raw materials, work-in-progress items, and finished products and losing out on valuable profits or lost sales.

reviewing warehouse reporting on a laptop

It’s important to determine an inventory replenishment policy along with your manufacturing inventory system that takes into account past sales trends, seasonal changes, and demand fluctuations. A good rule of thumb is to set a reorder point that allows for enough lead time to replenish supplies without having excess inventory on hand.

When determining your inventory management and replenishment policy, you need to determine how many parts or raw materials to order or produce at any given time. There are typically three choices:

    • Lot-for-Lot: Product or material orders are placed to match usage requirements for finished product purchase orders on the books.

    • Fixed-Order Amounts: Stock is purchased or produced based on the quantity in the lot package allocations. Say you need 48 o-rings but they only come in packages of 60.

    • Period X Demand: Orders for products or materials that are large enough to meet demand during period x (first quarter, holiday season, etc.).

Your replenishment policy should also specify when the items are needed in-house.  For example:

    • Point-of-Order: Each order is automatically placed when the inventory falls below a certain level.

    • Periodic Ordering: An order is placed at the same time each week, month, or quarter, for example.

Data-Driven Decision Making

By gathering data from past sales trends, manufacturers can gain insight into customer buying habits and anticipate future market needs. This information can be used to set accurate prices for products and services, plan production runs more efficiently, and better anticipate customer demand. For example, if past sales data shows that a certain product is particularly popular during the summer months, managers can adjust their production plans and inventory levels accordingly.

Developing an Effective Inventory Management System

Pull Past Sales Data

The first step in developing an effective inventory management system is gathering data on past sales trends. This includes information on customer orders, production runs, stock levels, pricing strategies, supply chain management, and more. This data can then be used to create accurate forecasts of future demand and production needs.

reviewing manufacturing production metrics on a tablet

Develop an Inventory Tracking System

The next step is setting up a system for tracking the current stock levels in each section of the warehouse or storeroom. Using a WMS is often the best choice for manufacturing inventory management. The use of barcode scanners and RFID tags can streamline inventory entry for manufacturing businesses while also providing a real-time view of current inventory.

Accurate Pricing Strategies

Setting accurate prices for products and services is another key component of successful inventory management. Use the data collected from past sales trends to determine the price points that will maximize profits without undercutting competitors or leaving customers feeling like they’ve been overcharged.

Planning for Unexpected Shifts in Demand or Supply Chains

One of the primary benefits of inventory management is the ability to plan for unexpected shifts in demand or supply chains. Knowing what products are likely to be popular from season to season, or which raw materials may become scarce due to external events, can give managers the foresight to adjust production schedules and stock levels accordingly.

What Is Manufacturing Inventory Management Software?

Manufacturing inventory management software is a suite of software applications designed to help manufacturers track and manage their inventory. Often the applications include the integrations of warehouse management systems (WMS), enterprise resource planning (ERP), manufacturing enterprise systems (MES), and manufacturing resource planning (MRP).

These solutions can provide real-time visibility into stock levels, allow for automated ordering systems, optimize production runs with just-in-time approaches, and provide advanced analytics capabilities to inform decisions about future needs. This type of software is essential for any manufacturer looking to improve its efficiency and profitability. By leveraging the data collected in the software, companies can make smarter decisions about inventory levels, production scheduling, and more.

More advanced types of manufacturing inventory management software may come with specialized features such as automated replenishment systems, lot tracking capabilities, or forecasting analytics. This type of system can provide even more control over inventory levels and production runs, allowing for greater agility in the face of changing market conditions. With this type of software, manufacturers can also gain insights into their purchasing habits and better understand customer demand patterns.

Why Manufacturers Should Implement Warehouse Management Software

warehouse worker on the phone while looking at a tablet

Warehouse management software (WMS) is ideal for manufacturers who want to gain more control over their inventory and production processes. This type of software allows for total visibility into stock levels, real-time tracking of orders, automated replenishment systems, optimized production runs with just-in-time approaches, and advanced analytics capabilities that can be used to make decisions about future needs. By leveraging the data collected in the WMS software, manufacturers can improve their efficiency and profitability.

Overall, implementing a WMS manufacturing inventory management solution is essential for any manufacturer looking to maintain accurate inventory levels and optimize their production and supply chain processes. With the right software in place like ASCTrac, manufacturers can gain a competitive edge by ensuring that they remain agile and responsive to changing customer demands.

Furthermore, WMS inventory management solutions are usually tailored to individual manufacturers’ specific needs, allowing for highly customized features and capabilities that can be updated as needed. This allows businesses to take full advantage of the latest technological advances and ensure that their operations are as efficient and cost-effective as possible.
different types of barcodesSerial number tracking and stock lot tracking capabilities can be added to warehouse management software, allowing manufacturers to track and manage their inventory. Serial number tracking allows for individual items to be tracked throughout the production process, while stock lot tracking lets manufacturers track a specific group of items that have been manufactured together.

In addition, warehouse management software can provide reporting tools that allow manufacturers to quickly assess the performance of their supply chain operations and identify areas for improvement. With this type of information, manufacturers can take proactive steps to ensure their inventory is always at the right levels.

Create Your Own Manufacturing Inventory Checklist

Creating a detailed inventory checklist is an important first step in any manufacturing process. This type of checklist can help manufacturers ensure they have all the necessary materials to properly produce their products while avoiding overstocking, shortages, and other issues.

The most effective inventory checklists usually include items such as raw materials, work-in-progress goods, finished goods, WMS software capabilities, serial number tracking and stock lot tracking options, forecasting tools, analytics capabilities, and reporting features. By ensuring all these items are included in the list, manufacturers can be sure they have all the necessary components to properly manage their manufacturing inventory.

By leveraging an effective inventory checklist and proper WMS software, any business can ensure its manufacturing processes and operations are running as efficiently and cost-effectively as possible. With the right tools and processes in place, manufacturers can maintain an optimal supply chain while avoiding possible delays or disruptions.

Warehouse Layout and Design

warehouse receiving an order for putaway

In addition to utilizing manufacturing inventory software and WMS software, manufacturers should also ensure their warehouses are properly laid out for maximum efficiency. This includes creating an efficient layout that maximizes space utilization and allows for easy access to all items for better inventory management. Additionally, manufacturers should consider the use of automation and robotics in their warehouses to streamline operations and reduce labor costs.

By carefully analyzing their warehouse layout and design, manufacturers can ensure they are always operating cost-effectively and efficiently. This type of analysis should be done regularly to identify any areas that may need improvement or optimization.

Benefits of Choosing ASCTrac for Your WMS and Manufacturing Inventory Software

Complete tracking and costing for the ERP solution

ASCTrac provides a complete tracking and costing solution for manufacturers in need of an ERP system. Our software can be used to track all aspects of the manufacturing process from raw materials, work-in-progress goods, finished goods, and more. With ASCTrac, manufacturers can easily keep track of all their inventory levels as well as any costs associated with those inventories, allowing them to accurately forecast future needs and properly manage their finances.

Real-time visibility into inventory and production processes

Another major benefit of using ASCTrac is real-time visibility into inventory and production processes. Our software provides manufacturers with a comprehensive view of their entire manufacturing process so they can quickly identify any issues or potential risks. With this real-time visibility, manufacturers can take proactive steps to ensure their production processes are running as efficiently and cost-effectively as possible.

Advanced analytics and reporting capabilities

Finally, ASCTrac offers powerful analytics and reporting tools that allow manufacturers to quickly assess the performance of their supply chain operations. With these tools, users can quickly identify areas that need improvement and make adjustments as needed to ensure their operations are running at the right levels. This helps manufacturers ensure they are always making the most of their resources while minimizing costs and delays.

By leveraging all the features and capabilities offered by ASCTrac’s WMS and manufacturing inventory management software, businesses can ensure their supply chain operations are running as smoothly and cost-effectively as possible. With the right tools and processes in place, manufacturers can maximize efficiency while avoiding potential disruptions or delays.

To learn more about the importance of manufacturing software for inventory management, WMS software, and integrated systems solutions from ASC Software, contact us today!

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