Inventory management is the lifeblood of the supply chain. It is a system that is interconnected – it is critical to know what the perfect balance of supply and demand is or else disadvantages are inevitable.
If you do not have enough inventory you miss out on a lost sale from customers. If you have too much, you risk needing more space, or you may end up with obsolete or outdated stock, which is expensive.
The key to keeping the correct amount of inventory is to executing a proper flow. This does not only include timely movement of inventory but managing the vast amount of information associated with those items to keep them in an optimal supply chain movement.
With a focus on both planning and execution, here are some proven critical strategies that can you put into action. It is time to get back to the basics that many companies have been neglecting for years.
Are you using inventory optimization tools?
These tools have been gaining momentum in business as they enable a business to evaluate their entire inventory management supply chain. Different software tools can take into account demand variations, supply variations and replenishment parameters to determine how much inventory you need to hold against that particular variable. These tools are often great with analytics and make business inventory management easier.
Are you using business solutions that use real-time data?
Using an Excel spreadsheet is obsolete. Powerful sales and operations planning solutions are now using integrated systems whereby the tools use real-time analytics that take all the nodes of the supply chain into account.
Sharing data on one platform is key and these solutions allow everyone involved to get a picture of up-to-date inventory information. Benefits of real-time data includes having information right at your fingertips, so managers can capitalize on unique opportunities, take advantages of strengths and bypass threats and provide solutions to weaknesses.
Are you treating all SKUs the same?
The reality is, one size does not fit all. Each and every piece of inventory does not have the same supply and demand variation pattern. The key is to focus on 20% that statistically make up 80% of your volume and manage inventory to the best of your capabilities to increase your bottom line.
Are you watching your suppliers?
When suppliers do not stick to their promises and deliver on their commitments this creates costs. There is a real need to monitor supplier activity. Good inventory management systems will track the inbound receipt of an item. If there is a delivery date promised, a date of actual receipt, quantity ordered and then quantity received, these measures can be tracked and you can analyze a supplier’s reliability. This is a great blue print for identifying unreliable suppliers, which are costly. By identifying unreliable suppliers, you can take steps to resolve issues and work towards improving suppliers’ performance, safeguard against your own inventory or change suppliers altogether.
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.