The Importance of Effective Inventory Management in the Philippines

Businesses all over the world, especially ones that are in the Philippines, need inventory management in order to fulfill their business goals and objectives. As a concept, inventory management is relatively easy to understand. You can take it literally and say that it is managing inventory and you wouldn’t be wrong. More precisely, it refers crucial aspects of management – the process of overseeing, controlling, and handling the flow of inventory units that are used in the production or distribution of goods.

Although the term is easily understandable, the actual process is a difficult one to get right, let alone master. More often than not, when inventory management is mentioned, people only think of keeping track of finished goods, but it goes beyond that. For one, inventory doesn’t just pertain to end products, it actually includes other kinds and types – all of which is discussed at a later part of this article. Moreover, inventory management is a long process that includes a lot of steps and every single one of them must be done right in order to not disrupt the entire process.

At its core, the goal of inventory management is to ensure that inventory levels are always balanced. This means there shouldn’t be too much or too little of something in stock. Once this goal is accomplished through effective and proper execution, benefits are attained in the form of proper cash flow, cost savings, and a lot more.

Businesses all over the world, including the Philippines, use inventory management because it’s part of the job, but rarely do these organizations understand its true importance. The benefits mentioned here are just some of the more obvious ones and barely show how much impact effective inventory management has on a business.

If you want to learn more about inventory management and its true significance, then read more as we get into its specifics!


7 Different Types of Inventory

7 Different Types of Inventory

There are several other types of inventory aside from finished goods and it is important that you are aware of each one. This will then help you determine which inventory management system and techniques to use. All in all, there are 7 types of inventory and we have them listed here:


Raw Materials

Raw materials are made up of items needed to produce your business’ own goods. It can range from concrete and steel to flour and water depending on what products you manufacture. Tracking your supply of raw materials is the first step to inventory management as it allows you to accurately forecast your production levels for the next quarter and the next year.



Work-in-process (WIP) inventory isn’t as straightforward as raw materials and may refer to almost all materials, components, assemblies, and subassemblies that haven’t yet been declared as finished goods. Included in this category are raw materials that have been released for processing and items that have been processed and waiting for final inspection. Simply put, anything that has a parent material and isn’t considered raw is a WIP.


Finished Goods

These are completed items that have passed final inspection requirements and are ready to be sold directly to customers or sent to retailers, wholesalers, distribution centers, and the like. They can also be warehoused or kept in storage for some time before they’re sold or sent to buyers.

Finished goods don’t necessarily have to be sold to be considered as such. What’s important is that they are completed or finished products that are ready to go out the door anytime.


These three – raw materials, work-in-process, and finished goods – are the most basic types of inventory that most, if not all, businesses are sure to have. However, we’ve included a few more important types that you need to be aware of:


Consigned Goods

As mentioned earlier, finished goods can be sold directly to your customers or through your distribution partners. Whenever a product reaches any of your distribution partners, they go from being finished goods to being consigned goods – assuming that they are still your property. For example, an automobile that you manufactured and sent to a car dealership is considered a consigned good because you still have ownership it even if you have to share the profit.


Merchandise Inventory

If you’re not the one manufacturing or producing goods and are simply reselling them – in other words, you are a distributor, wholesaler or retailer – you most likely have what is called merchandise inventory. These are goods that were purchased from actual manufacturers and then resold to third parties. Although more common in merchandising, it is not unusual for actual manufacturers to have merchandise goods on hand.


MRO Supplies Inventory

Maintenance, repair, and operating (MRO) supplies are items that are consumed during the production process but aren’t necessarily part of the finished product. Examples of this are safety equipment like gloves and packing materials such as tape and cardboard. These things may not be directly part of the finished goods, but the production process cannot be done nor completed without them. Office supplies such as pens, paper, pencils, and rules are also considered MRO goods.


Safety and Anticipatory Inventory

Safety and anticipatory inventory are goods that businesses produce or purchase in order to cover market fluctuations. They aren’t sold immediately and are left in storage to protect businesses against the uncertainties of supply and demand. These items reduce the risk of a stock-out (an event where items are out of stock) which can affect your customer service and deter overall revenue.


5 Inventory Management Systems

5 Inventory Management Systems

A system is important to properly and effectively manage your inventory and there are main types that businesses often use for their inventory management in the Philippines:


Perpetual Inventory System

A perpetual inventory system is when a business constantly updates their records and accounts. What this means is that they continuously add and subtract whenever items are received, manufactured, sold, transferred, and scrapped. Many prefer this system because it allows them to deliver up-to-date and accurate inventory information given that the process is done and managed properly.

There are also downsides to this, though. In most cases, specialized equipment and software are needed to implement this system which leads to high cost. Additionally, it may not always reflect actual inventory. Since physical inventory counts aren’t usually done, stolen and improperly scanned items might not be reflected in records and which may cause problems for the business.


Periodic Inventory System

Unlike the perpetual inventory system where inventory data is updated daily, the periodic inventory system allows businesses to track their inventory levels in specific and set and intervals. Usually, there is a one-year interval between inventory checks but that can be reduced per the digression of the business. It can be done monthly, quarterly, or twice a year.

Similar to the manual inventory system, this is most useful for small businesses that only carry few materials and goods. Not only do physical inventory counts, which are necessary for this system, become much easier for them, they can also accurately estimate costs and production levels without having to do daily inventory.


Manual Inventory System

As the name suggests, manual inventory is when businesses perform manual or physical inventory counts to keep track of their materials and goods. The easiest way to do this is through the use of a spreadsheet and it works best for small businesses such as mini bakeries that you find at the side of the street.

Although highly effective and capable of delivering the most accurate accounts, doing manual inventory counts can be tedious and time-consuming. On the bright side, it removes the need to purchase costly equipment to record inventory items.


Barcode System

Barcode technology is one of the major innovations used in inventory management systems. Compared to manual inventory counts, barcode tracking is more accurate and efficient as it automatically updates inventory levels every time an item is scanned.

This system offers many benefits for small, medium, and large businesses alike. It eliminates the risk of making data entry mistakes, speeds up the inventory management process, accurately keeps records, allows for the removal of manual or paper systems, and more. Major retailers are advocates of barcode technology because they often have warehouses full of inventory.


Radio Frequency Identification (RFID) System

At some point, barcode technology was the epitome of inventory management systems. Today, radio frequency identification (RFID) has taken that title and raised the bar higher than what was thought possible.

Businesses that use RFID technology often move thousands of items in and out of their facilities. Each of these items is fitted with an RFID tag which is then detected and read every time it passes through the reader. Once the tags are read, inventory data is changed and updated. RFID negates the need to individually scan items and can read tags from 300 feet away with great accuracy.


When creating your own system for inventory management in the Philippines, you would first have to decide whether it will be perpetual or periodic. After that, choose what to use among the manual, barcode, and RFID systems. The information written here should be enough to help you create the most effective inventory management system for your business.


3 Reasons to Invest in Inventory Management

The Importance of Effective Inventory Management in the Philippines

Whether or not your business operates in the Philippines, inventory management is what helps you achieve more because it is an important aspect that heavily contributes to success. It is crucial that money and time be invested in the process.


Increase Customer Satisfaction

Often times, customers look for specific products. They’d ask you whether or not you have a particular item in stock, and most of the time you would give them the right reply. There are times, however, when false data due to poor inventory management interferes and you end up making a promise that you actually can’t fulfill to an anticipating customer. As a result, customer satisfaction drops and you never hear from that customer again.

With proper inventory management, however, you can tell a customer with certainty whether you have their desired item or not. If you do, then they leave happy and with their hands full. If not, then at least they aren’t left waiting for something you don’t actually have.


Boost Employee Efficiency

You may not believe it but implementing a great system for inventory management can actually increase employee efficiency. Business owners and employees know just how much time is spent and wasted in locating inventory. Often, employees spend hours in the back room looking for items that are needed or double-checking inventory levels.

All this can be avoided with proper inventory management. No longer will your employees have to run to the back and do manual recounts when asked about the inventory because everything is listed in a single, organized system.


Improve Distributor Relationships

It is important to care for every business relationship that you have established and that includes the ones you have with your distributors or vendors. They may not be directly involved in the manufacturing process, but they’re the ones who put your product on the market, so it is in your best interest to improve your relationships with them.

With a seamless inventory management system in place, you and your distributors are always kept in-the-know of all your ordering and purchasing needs. You can even modify your system so that certain items are automatically ordered and sent at specific intervals based on accurate and reliable order history. These things keep transactions smooth and consistent which is sure to please both parties, but especially your distributors.

In addition, implementing an effective inventory management in the Philippines has more benefits like having accurate inventory data, saving time and money, and keeping an organized inventory.


Inventory Management Made Easier with StoRemote!

There are many systems, techniques, and strategies that can be used for inventory management in the Philippines, but the one we recommend most is StoRemote!

StoRemote is a one-stop tool for any and all businesses. Its main function is to help businesses streamline daily tasks like tracking employee attendance and hours, creating Philippine point-of-sale system reports, and inventory management.

Using our software – which you can install and access using any device and operating system – you will be able to monitor your business anywhere and anytime you want. You can even manage your online stores and create an app that is customized for your business with this incredible tool.

Interested? Head on over to our website to register and find out more about StoRemote. Avail of it’s amazing and innovational features today!