Managing inventory has always presented complex challenges for organizations. Unavoidable factors like changing customer behaviors, seasonal variances, long lead times, delays and budgetary constraints can all impact even the best-laid inventory management approaches.
Manual processes can also complicate the inventory management strategies, which can benefit greatly from technology aimed at streamlining the process.
TechTarget states that “Inventory management platforms can reduce inefficiencies and improve inventory handling, replenishment and fulfillment.”
It says inaccurate data and analysis, delays in reordering, ineffective production planning, and inventory defects and waste can all contribute to a company’s inventory management headaches.
The most effective inventory management strategies help procurement departments, supply chain professionals and other stakeholders streamline processes, operate more efficiently and drive down inventory carrying costs.
Here are five tactics you can start using today:
1. Adopt a good inventory management system
A sound inventory management system is the beating heart of any enterprise, offering real-time access to data that enables business leaders to forecast trends and shifts in buyer needs, as well as gain full transparency into demand and inventory levels.
Kristy Short writes in “8 tactics for inventory management,” that “inventory management systems output powerful analytics and provide much-needed visibility into operations. For example, monitoring run rate to gain visibility into how much of an item you are selling at a given time helps accurately predict future demand.”
2. Take control of your own inventory
Don’t rely on suppliers and providers to accurately report on inventory levels. Take the lead role by regularly monitoring, auditing and managing inventory in your system to maintain an accurate picture of goods. Keep an eye on what’s coming into your supply chain, regularly check the quality as well as the quantity you receive, and conduct inventory checks periodically throughout the month or quarter.
3. Leverage vendor-managed inventory strategies
In “The Importance of Inventory Management in Electronics Supply Chain,” Ninaad Acharya describes how companies can use vendor-managed inventory – or VMI – to reduce stockouts, minimize excess inventory and reduce the burden on in-house inventory management. This inventory tactic can also help solidify supplier relationships which, in turn, may lead to better pricing and terms. For best results, businesses must work closely with their suppliers to establish clear guidelines and expectations for inventory levels and replenishment. Organizations should also use software tools to track inventory levels and usage, both of which can help anticipate future demand and support better decision-making.
4. Conduct an ABC analysis
This inventory management technique ranks inventory items based on their importance to a business. Evan Tarver writes in Forbes, that “this is most helpful when a business needs to prioritize which items to order and store, allowing for more oversight on certain inventory items.”
When conducting an ABC analysis, he recommends dividing the inventory into three categories:
- A Items: The most important items that account for 20% of the inventory items but up to 80% of the inventory value.
- B Items: Items with medium importance to the business that account for 30% of the inventory items and roughly 15% of the inventory value.
- C Items: The least important items that account for 50% of the inventory items but only around 5% of the inventory value.
5. Experiment with advanced technologies
The Internet of Things and smart warehousing technologies can help businesses optimize inventory management by providing real-time visibility into inventory levels, locations and movement. Acharya writes, that “with IoT sensors and smart tags, businesses can track inventory in real-time, streamline supply chain operations, and automate tasks such as inventory counting and tracking.”
Use these five tips and you can successfully navigate the balancing act that is inventory management.
