Inventory optimisation makes sound business sense. Applying best practice approaches to inventory control will improve competitive advantage and profitability.
The primary goal of optimisation is to get the balance right between supply and demand. Having the right stock on-hand to service consumer demand while trying to reduce inventory carrying costs and avoid over-stocking.
To ensure you are maximising efficiency and profitability, here are some key actions you can undertake to accomplish optimal inventory control.
A company’s performance frequently depends on external factors such as seasonal demand, market trends, economic conditions and other business developments. These influences can all cause unpredictable demand variability.
Automated demand forecasting will help take the guesswork out of inventory control, managing what and how much inventory to carry within a set timeframe. Automation will dynamically calculate the anticipated demand for an inventory item, based on historical sales data.
Use this information to ensure optimal minimum stock quantities are ordered and optimal maximum stock quantities are held.
Create categories for similar stock items and group together, placing high turnover items where they are easily accessible for picking and dispatch. This should be part of your overall warehouse management system to enhance inventory control, streamline operations, increase efficiency and reduce picking errors.
Inventory optimisation tools can help warehouse and retail managers track the demand patterns, of individual products to create a better balance between customer demand and stock replenishment procedures.
The use of barcodes scanners and radio frequency identification tools make it easy to track inventory as in enters and leaves your business. This helps to track goods from order to dispatch, provide more timely identification of restocking needs and detect any stock discrepancies.
Invest in Technology
Inventory optimisation software takes a holistic view of stock management by considering inventory levels across the entire supply chain. An approach to optimal inventory control takes into account supply and demand variability, considering how inventory levels at any point can have an impact on inventory levels up and down the supply channel.
Software provides accurate, real-time visibility of what is happening in your organisation. It can register seasonal fluctuations, supplier lead times, recording demand across product ranges and changes to order volumes.
Automated re-ordering systems enable a company to better track inventory levels and prepare for unexpected events. It provides real-time supply levels of every product in the store, warehouse or manufacturing plant.
When stock levels hit pre-determined low levels, systems will automatically place a replenishment order. This will help to avoid both over stocking and under stocking situations as demand patterns can be automatically overridden to allow for seasonality, or even unseasonal spikes in demand due to unforeseen events.
Implement Continuous Improvement
Once you have identified optimum inventory levels, it doesn’t stop there. The information can be used as your business specific benchmark from which you regularly measure and check your inventory health.
Continuous monitoring and analysis should be undertaken to ensure optimised inventory control is being maintained. Ensuring operational costs are kept to a minimum and customer service levels and operational efficiencies are not only maintained but continuously improved.
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.