Can excess inventory be managed sustainably?

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Consumers demand goods and that means there needs to be inventory to fulfil those demands. However, what happens when a company’s inventory stock exceeds demand? The global demand for goods continues to rise, increasing our environmental footprint. Whenever inventory stock is produced, it needs energy and water. In turn, carbon is emitted into the atmosphere; when excess goods are produced it directly impacts the environment. It is important to look at ways to manage inventory and strive for sustainable solutions to this excess problem.

Producing enough inventory stock

An important aspect in managing your inventory in a sustainable manner is not producing too much inventory in the first place. To produce these demand calculations, companies need to go through a process called demand planning. Demand planning allows a company to look at historical sales data and market trends to aid their demand calculations. With the right data and software, this information can play a critical role in making production and inventory operations more efficient and sustainable. Demand sensing software, alongside a good inventory management system, will enable businesses to achieve this.

When companies can respond to information from data sensing software and management advice, they can protect the environment through a reduction in manufacturing, distribution, and housing the inventory stock in a warehouse. This minimises the use of carbon, water and materials used in production. Not only is this better for the environment, it is also a cost-saving exercise for the company.

Sustainability starts from the top

One of the most influential factors in having sustainable inventory is management. If there is a driving force from senior management to reduce excess and obsolete inventory, it is more likely to happen. With change and direction coming from above, they can train employees to forecast and keep excess and obsolete inventory to a minimum. Moreover, management needs to communicate with the planning and sales teams. Transparency is key and communicating real-time data would be very efficacious.

Inventory life cycles

Another component to look at is measuring the life cycle inventory cost. In the beginning during the design stage, it can be helpful to factor in the cost on inventory. By looking at the life cycle cost for all of the components that are necessary, you can more accurately assess the total cost of having any part of the product in inventory.

In addition, when designing products, engineers need to be aware of what parts of a product are left over at the end of a life cycle. If there are excess parts left over from production, these components can take up working capital. Maximise as much of the material in production and aim to decrease waste to achieve a more sustainable company.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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