Inventory management is the key difference between successful businesses and failures. Companies as old as the Ford Motor Company had to strategize based on their inventory and many companies ultimately fail due to lack of strategic thinking. In today’s business environment, a solid inventory can make or break you as an organization. If your customer must wait three to four weeks to receive your product, chances are they will look to your competitor. Alternatively, if you streamline your inventory management to a standard where you can provide two-day shipping guaranteed, your business will flourish. In this article, we have curated a list of four ways to improve and optimize your inventory management.
Calculate Safety Stock Levels
According to the Wall Street Journal, there are several ways to integrate a polished and optimized inventory system. The highest performing suppliers calculate the optimal amount of inventory to maintain in an effort to decrease costs, ensure consumer happiness, and ease the burden of capital. This procedure is done every three to six months based on the demand the organization creates. This calculation will guarantee that any strategic planning or endeavor can be taken care of from a supply perspective. Integrating a new strategy and failing to maintain a minimum inventory will result in a down quarter for your company, implementing this calculation frequently will create great long-term results.
Do Not Treat Every Product the Same
Every product your organization offers perform differently. Therefore, utilizing a “one size fits all” approach to your inventory management will ultimately fail. Although this procedure may save time and effort, the long-term costs will outweigh the short-term. When creating the strategy behind your organization’s inventory, focus on the 20% of products that garner 80% of your sales. These products should hold the majority of your focus. Calculate the safety stock levels for this item, and proceed to the next product. Simply put, your biggest seller should be refilled at high speeds, the next product can be given some time, and so on. Maximize your profits by focusing your efforts.
Implement Real-Time Analytics
Business in the 21st century revolves around technology. Integrating fast, reliable and inexpensive technologies can help your business maintain appropriate levels of inventory. According to Forbes, the savings of maintaining three weeks of inventory in comparison to four weeks can save your company up to 65 million (depending on your size). This level of computation can be achieved through real-time analytics. On top of saving money and increasing profits, this will create a better customer experience by allowing associates to spend time with consumers looking for the products they need. Furthermore, efficiency tends to increase upon successful integration of a real-time analytic system. Lastly with real-time updates, you can implement a system of processing orders based on how frequently an item is purchased.
Target The Cause of the Problem
Inventory Locator Service said, “Far too often business owners will blame their employees for a reoccurring problem instead of looking to diagnose the underlying problem.” In an attempt to better understand inventory management, study the best in the supply industry. The top performers in this industry have a tried and proven method of optimizing their systems: a dual task force. The two teams work together to optimize the system in place. However, they are responsible for different aspects of the optimization process. The first task force is utilized to target the root of a specific problem. For example, inventory for a specific product continues to be too high, they find it and inform the other task force. The second task force is in charge of implementing the remedy for any problem given to them. This process divides a complex problem and expedites the solution.
Inventory management is among the most complex systems within the business environment. The supply chain must be taken into account for every strategic plan. Although it can be a daunting task to revitalize your inventory management system, the long-term benefits will always outweigh the short-term costs. Consider integrating these methods of management in your business today.
