As part of your business process management, inventory management sounds like a simple enough concept… you reorder inventory before you run out. But the actual practice is more complicated than it sounds.
Inventory can be a company’s biggest asset, and thus, the biggest asset expense. Poorly managed, and a company can go out of business. Inventory ties up a lot of cash so you need to optimize the expense by carrying enough to satisfy demand, but not so much that your investment sits, potentially becoming stale, outdated or obsolete.
Let’s look at five ways to improve your inventory management so that you can balance your needs and find that sweet spot that’s perfect for your organization.
- Take advantage of technology. This one is huge. If you automate your inventory tracking, you will save all kinds of time, and time means money. Using mobile devices like barcode scanners or iPads will keep your inventory updated quickly and easily. This will also increase accuracy for better decision-making, financial projections and budgeting by allowing for a greater understanding of the total cost of your inventory, including delivery, storage and shipping. Use some of the time savings to create new and better reports to take advantage of the more accurate and timely information you now have access to. Such things as material requirements planning will be greatly enhanced with more accurate information.
- Work closely with suppliers. Always know their schedule, so you don’t have any surprises. This helps you plan ahead when they may close for a holiday or have slower response times during their busy season. Let them know when you may have a larger or more important order than usual, so they have time to schedule and fulfill your orders. Take advantage of special terms they may offer when they have gaps in their schedule to get the best rates. Let them know they are a part of your success or failure. But to hedge your bets, you may still want to consider having a backup supplier for all stock, in case of a situation where your first supplier can’t fulfill your needs.
- Think about grouping inventory. Use a common element, like your most profitable items, the most liquid stock based on turnover, or the slowest to restock based on manufacture and delivery time. Then adjust your warehouse logistics so that the most popular products are closest to the staging and shipping area and you’ll save time and money when receiving, storing and shipping product. Take a look at these groupings periodically so that as changes occur, you are responding with your inventory setup to continue to be as efficient as possible. Using reports with these new product groupings will help you look at the trends in your stock and see if the actual sales match your business plans and adjust accordingly.
- Do an annual review. Automation will be a huge advantage, but you still need to check once a year to make sure your actual counts match your reports. Also, do spot checks periodically to ensure your systems are working correctly. This may help you discover obsolete stock, correct coding errors through training or investigate potential internal theft. The annual review is just a good business practice, but you can’t wait until then if some numbers aren’t adding up.
- Bring in a pro. Consider a consultant to help you establish a system based on your specific needs. They will help you find the right software, work on warehouse logistics and balance your internal systems like reorder and stocking policies to maximize your efficiency. Time to upgrade order management software? A pro can help you decide and ease into a transition smoothly if you need one, as well as making sure your new software integrates with all your other internal systems. They can tell you what’s new in the industry and conversely, what software is becoming obsolete before you find a critical need for help from a system that no longer provides it.
These five steps will help you improve your inventory process management through better decisions. In turn, you will become more competitive with a great advantage over others in your industry. You will increase your profitability while lowering your costs when your inventory is optimized.
Where should you start? If you’d like some help with your inventory as part of your business process improvement, consider turning to consultants specializing in this area. Move your unnecessary expenses closer to zero and you’ll become the hero when you optimize your process of inventory management.
Melanie Valenzuela has been writing about business topics for several years and currently writes on behalf of the business consulting experts at TGO Consulting. When not writing, she can be found working on her world perspective through travel; or challenging her heart rate by playing tennis, running, or attending a Kansas City Royals baseball game. You can find her on LinkedIn.