5 Ideas for Fresh Inventory Management
Proper inventory management is important for any business if they want to continually reduce costs and increase efficiency. Here are five fresh ideas that will help you improve your inventory management effectiveness.
Upgrade Your Inventory Management Objectives
It takes an enormous amount of time and resources to continually track the details of hundreds of inventory items. To avoid this, focus on the inventory items that matter the most, which are usually only 20 percent of your total inventory volume. These high demand items will deserve the most logistical attention. Studies usually show that these popular products can generate up to 80 percent of total product demand. Therefore, inventory managers should spend most of their efforts on these items through forecasting demand, reviewing reports and analyzing in-stock positions. All inventory items should receive an appropriate amount of attention in accordance with their demand and popularity.
Revamp Your Inventory Check Strategy
Inventory managers know that they must regularly perform physical checks to reconcile physical stock with reported numbers. However, every inventory category can actually be assigned into one of three reporting levels: safety, replenish and excess. Safety means that stock levels meet the minimum volume required to protect against supply chain problems, such as those created by manufacturing mistakes or distribution center delays. Replenish means that certain stock levels should be increased in the coming weeks. Excess levels means that there is a backlog of superfluous products.
When calculating the safety stock levels, many inventory managers sometimes overly on traditional methods, such as simply requiring a minimum of two weeks supply for every product. However, these formulas typically are based on an amalgamation of dissimilar products with a mixture of statistics from both low and high demand products. Also, these usually don’t take into account ABC categories, sales forecasts, manufacturing schedules and required production lead times. Inventory managers should use the most effective method to calculate their safety stock levels. These statistical formulas are often computed within inventory or warehouse information management systems.
Spreadsheets vs. Software Programs
Small warehouses or organizations with limited inventory can function quite well with traditional spreadsheets created in Microsoft Excel. However, spreadsheets simply cannot guarantee 100 percent accuracy and peak functionality for larger operations. It’s troublingly easy for spreadsheets to be accidentally lost and deleted. The only foolproof way for multiple people working on inventory management is to synchronize their work through standard software programs. Even well-known accounting packages, such as Quicken and Quickbooks, offer adequate inventory database and management functions.
Who Orders Products?
Most products are ordered primarily by production planning or sourcing managers. However, studies show that a cross-functional team of competent professionals are much better at making optimal product ordering decisions. This is especially true if there are members of management from production or manufacturing departments. A cross-functional team will represent logistical and production functions from the beginning to the end of the product life cycle. By collaborating and coordinating efforts, these teams will be able to determine the optimal frequency for producing and ordering products.
As a final note, excessive inventory levels can be reduced through regular supply projections and just-in-time management.