Inventory Management System in Apparel Industry

Inventory management is one of the most important and least sexy aspects of running an apparel business. It can say, inventory management is the lifeline of apparel manufacturing business. For any industry, especially in the fashion and apparel industry, inventory management is key to long-term profitability. Inventory can be described as stock maintained between any two processes for uninterrupted operation. It can also be defined as assets that are intended for sale, or are in the process of being produced for sale, or are to be used in producing goods. Inventory is primarily maintained due to two reasons—to optimize the sourcing cost and to minimize the risk of stock out. The higher the inventory, the higher the capital blockage, and/or the higher the space requirement; on the other hand, lower inventory may lead to disruption in production or unsatisfied customers. Therefore, managing inventory is very important for every organization.
Fig: Inventory management in apparel industry
Most garment factories that buy fabric on an order basis may use the average cost method as the prices do not vary much in a small span of time. Since inventories represent a sizeable investment of company funds, and larger inventories mean higher costs (space, insurance, taxes, capital costs, etc.), a common inventory management goal focuses on improving inventory turnover. Low inventory turnover means that the company is carrying too much inventory, thereby unnecessarily restricting the access to cash that could be used in other profit-making activities.

Inventory Management in Fashion and Apparel Industry:
Inventory management in garment industry is a very challenging task. Because loss and profit of business very much depends on proper inventory management and control. There are some inventory management techniques to overcome challenges. In this article I will discuss 4 major techniques of inventory management. They are given below:

1. Inventory accuracy:
Inventory accuracy is a measure of checking how closely official inventory records match the physical inventory. Operations and material management people have an interest in the accuracy of each item, as shortage may result in major production breaks or emergency buying and an excess can result in obsolete inventory. Inaccuracy in inventory can be because of many reasons such as improper data entry, incorrect unit used in calculation, poorly trained employees, stealing, or supplier errors.

2. Average days of inventory in hand:
The time for which the organizations hold the inventory before selling or producing a product is called average days of inventory in hand. If these days are less, the organization requires less working capital to invest in inventory.

For the garment industry the average days of inventory in hand is the day fabric is procured until the planned cutting date. Manufacturers who buy fabric must keep an eye on the number of stock, so as to maintain a healthy cash flow.

3. Inventory carrying cost:
Inventory carrying cost is the cost a company incurs over a certain period of time, to hold and store its inventory. The best way to avoid or reduce these costs is to sell them as soon as they become obsolete. Inventory carrying cost is expressed in percentage on the average inventory throughout a full year.

Cost of carrying inventory ¼ total annual costs = average inventory value

Total annual costs include warehouse space, taxes, insurance, material handling, cost of money invested, etc.

4. Incidence of out of stock:
For many businesses having a shortage of stock midway in production is a major factor leading to damage in business. Deciding on inventory levels is a delicate balance between not having too much and avoiding stock out situations. One simple stock out can lead to devastating effects on costs and may be losing a customer and therefore these should be tracked from time to time to control inventory levels. In the apparel industry, apparel retailers must manage continuously with the changing fashion, style and design. As the number of designs of products increases, the inventory management becomes more critical and complex.

Recently, textile and apparel industry is widely using inventory management software. It is a computer-based system for tracking inventory levels, orders, sales and deliveries. In apparel manufacturing industry, It is also used to create a work order, bill of materials and other production-related documents. Generally, readymade garment industry use inventory management software to avoid product overstock and outages. This software gives a distinct advantage over their competitors.