Inventory optimisation may sound like a big task. Perhaps even a daunting task. But the benefits are equally as big and once you break it down, it’s not actually that daunting. Inventory can be massive in physical scale. However, it can also be massive in terms of money and company investment. After all, inventory is one of a company’s biggest assets. So why are companies still managing their biggest assets with manual data tracking documents like Excel or Access? Sometimes companies start small and grow quickly, but they are still using their initial tools despite an increased scope to manage. Inventory optimisation applies to both big and small companies. It’s all about knowing what you have and managing it effectively.
Let’s say a business is having difficulty in their warehouse with a perishable item. It was identified that it took longer to get to this product and to find the right one in the warehouse. The item got placed there last year when a different non-perishable item was discontinued. To solve this problem, they just moved it to the very front of the warehouse, swapping it with a product normally in the front of the warehouse. When employees went to look for the old product normally in the front, it took them much longer to find as it was now actually in the back. By trying to solve one problem they created another. Yes, one problem was solved, but the issue with fixing this one aspect is that you are not addressing the root cause of the problem. The root cause is mismanaged inventory. Luckily there are steps to take to fix the root cause and optimise your inventory.
Start with online inventory management
Online inventory management can be a helpful place to start addressing what needs to be optimised. Initially, all inventory must be recorded into the system. Once it’s there, it can track the inventory and monitor demand of different products, recognise low stock levels, track seasonal changes, and provide supplier lead times. All of a sudden, this information is located in a central place and data is automated. In addition, decisions about order volumes can be made with online inventory management.
Manage cash flow
Budgeting is a major task of maintaining an inventory. In order to budget effectively, online inventory management can track the total cost of ownership to have inventory on hand. From there it can calculate it against specific accounting periods. The total cost of ownership encompasses cost of materials, fixed costs, transport and logistics costs, redistribution costs and various smaller costs that funnel into the total cost.
The importance of proper warehouse layout
Optimisation through online inventory management software can help you create a warehouse that suits your demand and shipping needs. As we mentioned earlier, the one product was shifted to the front of the warehouse but it wasn’t necessarily moved there because of demand levels.
Rather, it’s important to lay out a warehouse so the fastest moving products are closest to the shipping and receiving zones. Online inventory management can provide detailed data on which items ship most frequently based on tracked information. Products with lower demand should be placed further back in the warehouse so it is aligned with inventory turnover rates. The layout optimises time spent looking for items and gets them shipped out to customers sooner.
Optimising inventory can start off as a big task, but with the right online inventory management tools, your company will be on the right track to efficiency.
