Speaker 1: Hello, everyone. I'm Ryan Chan, CEO and founder of Upkeep. In today's video, we're going to dive deep into inventory management, an essential aspect of facilities management. We'll explore how the best inventory systems operate, discuss vital concepts like just-in-time inventory and materials requirement planning, and reveal how to effectively control and maintain your stock levels. Plus, we'll shed some light on the role of quality and organizational control in managing inventory. Now, let's get started. Inventory management is an essential part of facilities management. It tracks items from the moment they're purchased to the time they're used. The best inventory management systems include detailed records of materials and items so they can be efficiently tracked and used. Remember, inventory is an investment that incurs ongoing costs such as storage space, management, and insurance. The goal is to have just the right level of inventory to avoid downtime, yet a minimal amount to manage, store, and insure. Facilities typically use either a just-in-time inventory method or a materials requirement planning system. The just-in-time method aims to minimize or even eliminate inventory levels by receiving needed items only when they are needed. This ideally eliminates storage costs, resources tied up in unused inventory, and overall waste. But it can be tricky to manage when demand for items may be unpredictable and supply may be unreliable. On the other hand, the materials requirement planning method involves anticipating the materials, items, and supplies a facility may need in a given period and purchasing accordingly. This system requires excellent record-keeping and reliable tracking of inventory materials so they can be located, used, and recorded accurately. Now, let's delve into inventory control, also known as stock control. It refers to the process of managing a company's warehouse inventory levels. The inventory control process involves managing items from the moment they are ordered throughout their storage, movement, and usage to their final destination or disposal. Over time, various control processes and formulas have been developed to help companies streamline these processes. Quality control is a crucial part of inventory control. Working with a supplier that has the same quality standards as you do can lead to a long-term relationship. And batch tracking ensures your stock consistently meets your highest quality standards. Organizational control is also key. It starts by labeling your stock with SKUs that are easily understandable and simple to read. Start with an initial stock take and then use the right inventory management techniques to keep track of movements and levels. The reorder point formula determines the right time to order more stock. It's calculated by adding together your lead time demand in days and safety stock in days. Basically, reorder point equals lead time demand plus safety stock. The economic order quantity, or EOQ, is the optimum inventory you should purchase to minimize the costs of ordering and holding. You'll need to know your annual fixed costs, demand in units, and carrying costs per unit to calculate this. An inventory control system is a computerized solution that brings all aspects of inventory management into one cohesive system. Its purpose is to control your stock in order to hold the least amount of inventory in your warehouses, thereby improving cash flow and lowering holding costs. Inventory management systems keep track of items that an organization purchases to manufacture or deliver its final product or service to its customers. It usually includes an array of hardware, software, and processes to identify and follow an item from the moment it enters a facility to the moment it is either used in a final product or consumed. A good inventory management system should contain certain components including an identification system, management software, and standardized procedures. An identification system can be a manual recording of model or parts numbers in a spreadsheet, a barcoding system that tags each item, or a complex radiofrequency identification system that involves microchip tags. Facilities typically use one of three kinds of inventory systems – manual, periodic, and perpetual. Manual inventory systems involve manually counting items in stock. Periodic inventory systems track inventory manually and periodically, often with the help of barcoding systems, and perpetual inventory systems deliver real-time data, often with the help of RFID tags. According to industry studies, more than $100 billion is spent on operating and maintenance materials by facilities each year. These studies also estimate that about 10% of this inventory never gets used. This may be caused by overpurchasing to obtain a volume discount, repeat buying when already owned materials cannot be located, or errors due to poor inventory records management. Choosing the right inventory management software will have a tremendous impact on your inventory control processes. It can either streamline the process or create an additional set of issues that companies then need to deal with. By employing a CMMS and fostering an employee culture focused on gathering and recording accurate data, facilities can better track inventory levels, manage purchasing decisions, and gain insight into areas where improvements can be made. When you use a set of processes and formulas in tandem with the right inventory management software, inventory control and inventory management can be simple. It's up to the companies to build the right framework to support it. And that brings us to the end of this video. Thanks for joining us today. We've covered a lot of ground, from the basics of inventory management to the importance of quality and organizational control. Remember, the right inventory management software, like a CMMS, can make all the difference. Don't forget to subscribe to our channel for more insightful videos. For more information, visit our website at upkeep.com. Until next time, keep your inventory in check and your operations running smoothly.