Inventory Control: Proactive vs Reactive Management

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Inventory control is a tricky process. Essentially, the goal of inventory control is to maximise profits with the smallest amount of investment into your inventory. Meanwhile, this target needs to happen without compromising on customer satisfaction levels. Inventory control is complex. Understanding the multitude of factors that come into play on a daily basis is no easy feat; it takes time and a strong fundamental framework to manage it properly.

It’s also difficult because the approach can be so varied depending on your business and warehouse set up. Each management style is unique and the strategies that make them successful might not directly correlate into success for your own business. Let’s have a look at some of the differences between proactive and reactive strategies in the warehouse.

Being reactive with inventory control

Sometimes, warehouses find it easier to manage stock control by just responding to the fire with a fire truck. When you are reactive in the warehouse, it generally means you respond to a problem after it happens. For a lot of companies, this is a viable way of operating. Planning for every scenario and having the stocks to support it can be extremely expensive. Although reactive strategies aren’t always practical in every instance, they can still be beneficial, especially in the early days of a company.

Being proactive involves a lot of investment in planning for hypothetical situations. After you have experienced a similar problem multiple times, then it’s a good opportunity to learn from this issue. Reactive strategies can shift into proactive ones in an organic matter. If a loading vehicle has been the root of an accident three times in the warehouse, then the reactive plan is no longer working. Take your learnings and devise a preventative strategy. You won’t be able to turn your warehouse into a proactive, optimised operation overnight, but slowly you can implement change over time.

Being proactive with inventory control

Proactive strategies involved future-proofing your inventory stock. They involve looking ahead several seasons or even years and planning for anticipated sales or demand. One of the best ways to proactively take charge of your inventory is through forecasting. With real-time data gathered from online inventory management tools, companies now have a goldmine of data at their fingertips; the data can unveil demand patterns you hadn’t picked up on before. You can use this data to help plan for the next purchasing round of inventory stock.

Online inventory management also lets you be proactive with your purchasing. Since it tracks inventory stock levels in real-time, it can trigger re-ordering when stocks reach a certain threshold. It can also be prompted to order certain amounts based on previous sales volume. This approach prevents stock-outs but minimises excess stock in the warehouse. This is one example of a proactive step towards optimising your warehouse. Inventory is an expensive asset — if you have too much or too little, it can be a costly problem to your bottom line.

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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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