Inventory management is something that is often overlooked in the ‘grand scheme’ of things, but in reality, if you improve your supply chain inventory management systems, then you can eliminate waste, reduce your inventory storage costs and effectively save a significant amount of money, so it is certainly worth looking at ways in which you can improve your inventory management.
1. The most important thing that you can do when it comes to improving your supply chain inventory management systems is to continuously look at how you are doing, what you can do to improve and any ways in which you can make the ways in which you manage your inventory or stock more effective. This is really important because it will ensure that you are always striving to make the systems that you use better, rather than looking at specific areas of inventory management, bringing in ‘improvements’ and then assuming everything is fine. You cannot assume this; you should continuously check to see what is working well and where any areas of weakness are. Remember data analysis is key – tools like ABC analysis can really help you in understanding your inventory.
2. Reduce the storage costs for inventory: By holding only the stock you need, either for Just in Time manufacturing or with regard to optimum stock levels you will reduce the overall storage costs for stock. They will need far less storage space and you may be able to reduce the amount of warehouses that you need. In addition you will not have to secure as much stock, which has a knock on cost benefit.
3. If JIT manufacturing is not an option, then make sure that you can base the amount of ‘safety stock’ that you hold by using demand forecasting. If you use forecasting models to help you analyse and then predict likely demand, you will be able to avoid overstocking or the dreaded ‘stock outs’. The software that you use to forecast demand will also help you to balance the risks associated with either too much or too little stock at any given time.
4. Automate wherever possible. The more a system can be automated the less it generally costs to run in the longer term, so wherever you can make sure that you can automate the facilities that you have.
5. Use technology to help your improve inventory management, whether that is through tracking items or by making sure that technology is responsible for replenishing stocks, you really need technology to help you take the staff time out of inventory management.
6. Ensure that there is joined up thinking in your organisation with the procurement team working closely with the inventory management section so that each know what the other needs. If these two teams work in isolation, then there will be little in the way of improvements over the longer term.
7. Consider implementing joint procurement systems with common suppliers, so that you can ensure that your costs per item are reduced.
8. Extend the time that is required before you have to pay. This will ensure that the stock that you are holding is not paid for until the last minute, which will save money over a long period.
9. Consider using vendor managed inventory systems, where the vendor actually manages your stock for you. This will save you all the paperwork associated with having to place orders, ensure that they are delivered and so on.
10. Never assume that you have made all the improvements that you possibly can. There are always new automated systems or new technological aids coming on the market all the time that will help bring about improvements to your inventory management; so strive for continuous improvements!