How to Implement Inventory Management System? Step by Step.

Hi Everyone,
In this post we are going to review basic Inventory Management process. I will include all steps, please comment below in case you want to know more or have some suggestions.

Implementing Inventory Management in NetSuite involves setting up key features, configuring inventory items, and establishing processes to manage stock levels, orders, and fulfillment effectively. 

Step 1: Preparation & Prerequisites

    1. Understand Business Requirements:
        • Types of inventory (raw materials, finished goods, consigned stock).
        • Inventory processes (purchasing, receiving, warehousing, fulfillment).
        • Warehousing structure (single or multi-location).
    2. Ensure Required Modules Are Available:
        • Advanced Inventory Management (optional for advanced features).
        • Demand Planning (for forecasting).
        • Warehouse Management System (WMS) (for barcode scanning, etc.).

Step 2: Enable Inventory Features

    1. Navigate to:
        • Setup > Company > Enable Features > Items & Inventory
    2. Enable Key Features:
        • Inventory Management
        • Multi-Location Inventory (if managing stock across multiple locations)
        • Advanced Inventory Management (optional: lot tracking, bins, etc.)
        • Serialized Inventory (if tracking serialized items)
        • Bins, Barcoding, and Mobile (for warehouse management)
        • Demand Planning (for inventory forecasting)
    3. Save and refresh the system.

Step 3: Configure Accounting Preferences

    1. Go to:
        Setup > Accounting > Accounting Preferences
    2. Inventory Preferences:
        • Default costing method (FIFO, LIFO, Average Cost, Standard Cost).
        • Inventory costing and accounting setup.
        • Preferences for item fulfillment and receiving processes. 

Step 4: Set Up Inventory Locations

    1. Navigate to:
        Setup > Company > Locations > New
    2. Define Each Location:
        • Name, address, and details.
        • Check “Make Inventory Available” if it holds stock.
    3. Multi-Location Inventory Setup:
        • Assign items to specific locations.
        • Set safety stock levels and reorder points per location.

Step 5: Create Inventory Items
    1. Go to:
        Lists > Accounting > Items > New > Inventory Item
    2. Fill in Key Details:
        • Item Name/Number
        • Units Type (e.g., each, box, kg)
        • SKU/UPC Codes (if applicable)
    3. Inventory Subtab:
        • Set up preferred vendor, reorder points, lead times, etc.
        • Assign to multiple locations if needed.
        • Define costing method and accounts (asset, COGS, income).
    4. Advanced Features (Optional):
        • Lot/Serial Number Tracking for traceability.
        • Bins for warehouse organization.
    5. Save the Item.

Step 6: Set Up Inventory Replenishment (Advanced)

    1. Navigate to:
        Lists > Supply Chain > Replenishment > New
    2. Choose Replenishment Method:
        • Reorder Point Planning: Basic automatic replenishment.
        • Demand Planning: Based on historical data and forecasts.
        • Time-Phased Planning: Advanced method using supply plans.
    3. Define:
        • Reorder points, preferred stock levels, and lead times.
        • Order quantities (min/max order quantities).

Step 7: Inventory Transactions

    1. Receiving Inventory:
        • Purchase Orders:
            Transactions > Purchases > Enter Purchase Orders
        • Receive Inventory:
            Transactions > Purchases > Receive Orders
    2. Adjusting Inventory:
        • Inventory Adjustments:
            Transactions > Inventory > Adjust Inventory
        • Used for correcting discrepancies.
    3. Transferring Inventory:
        • Inventory Transfers:
            Transactions > Inventory > Transfer Inventory
        • Move stock between locations.
    4. Fulfillment:
        • Sales Orders:
            Transactions > Sales > Enter Sales Orders
        • Item Fulfillment:
            Transactions > Sales > Fulfill Orders

Step 8: Inventory Valuation & Costing
    

    1. Costing Methods:
        • FIFO: First In, First Out
        • LIFO: Last In, First Out
        • Average Cost: Weighted average calculation
        • Standard Cost: Pre-defined standard values
    2. Inventory Valuation Reports:
        • Reports > Inventory/Items > Inventory Valuation
        • Provides real-time value of inventory.

Step 9: Reporting & Analytics
    

    1. Standard Reports:
        • Inventory Valuation Summary
        • Stock On Hand
        • Inventory Turnover Report
        • Backorder Report
    2. Saved Searches:
        • Create custom reports for specific needs.
        • Example: Low stock alerts, reorder point breaches.

Step 10: Automation & Customization
    

    1. Workflows:
        • Automate approvals for inventory transfers or adjustments.
        • Set automatic notifications for low stock levels.
    2. SuiteScript:
        • Customize inventory processes with scripts.
        • Automate inventory reordering based on real-time demand.
    3. Dashboards:
        • Add KPIs and reports for real-time inventory monitoring.

Best Practices
    1. Test in Sandbox: Always test changes in a sandbox environment.
    2. Cycle Counts: Regularly conduct cycle counts to maintain accuracy.
    3. Barcode Scanning: Use NetSuite WMS or third-party apps for efficiency.
    4. Regular Reconciliation: Reconcile inventory reports with accounting regularly.

Please note: In case you have any order open, close the order , follow process and then create new order to maintain proper opening and closing balance as well as inventory. 

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