Smarter Inventory Management and How it Might Save You Money
Read Time: 4 minutes
Today we’re going to look at how smarter inventory and stocking strategies can help save you money.
Understanding how to manage inventory properly, is crucial. To put it really simply, it helps you avoid unnecessary costs, improves cash flow, and ensures you have the right products available, when you need them.
If you have too much stock, cash is tied up. Too little, and you might miss out on sales. Getting the balance right (or at least better) can help us use resources more efficiently, reducing waste and increasing profits.
A lot struggle with inventory management because they don’t have a clear understanding of their stock levels or how fast products are moving. Some overlook the costs associated with storing excess inventory, whilst others may not anticipate the demand accurately, leading to stock shortages and missed opportunities.
Lets consider the following:
Understanding Stock Levels
Inventory Reviews
Bonded and 3rd Party Warehousing
Strategic Stocking
Best Practices for Efficiency
"An organisation's ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage." – Jack Welch
Understanding Stock Levels
I mentioned it earlier, too much stock means tied up cash, too little stock may mean missing out on opportunities.
So, we need to have accurate knowledge to be efficient. We need to keep precise track of what we have, where it’s stored, and the rate of turnover. You can introduce (if not already present) inventory management software to aid in providing real-time data, so you can make informed decisions.
A good starting point is conducting a comprehensive audit of your current inventory and start thinking about reordering points. Perhaps you are even able to set up automatic reordering? Although it may seem obvious, think about lead-times, potential delays, and any other potentials for issues.
Inventory Reviews
Carrying out regular inventory reviews helps you match your stock with current business and market demands. The process helps to identify slower moving stock which could benefit from pricing adjustments or promotions, and perhaps delays in anything on order.
Everything is done in an effort to help improve forecasting and planning by finding trends.
To begin, start by scheduling monthly reviews identifying items that are moving slowly and decide on actions to increase their turnover. The more you repeat this, the more you will start to build up a picture of the market and begin to spot trends.
Utilising bonded and/or 3rd Party Warehousing
Bonded warehousing (not paying duty when importing goods) can be used for two main reasons:
Defer duty payments to help with cash flow.
Avoid double duty payments if you intend to export material.
Third party warehousing can be used if you don’t have your own warehousing, are short on space, or perhaps have a quick turnaround but not the manpower to execute.
It can include services like order fulfilment, reducing capex and allowing you to concentrate on core business functions.
Strategic Stocking
Strategic stocking allows you to mitigate against the impact of market fluctuations and supply chain disruptions. This can be a great tactic if used alongside your inventory reviews, particularly if you have seasonal products. Analysing the collected data as well as market trends enables you to figure out optimal stock levels, ensuring availability of critical items, and reducing dependency on risky supply sources.
A major one companies miss out on is utilising consignment stock. Essentially, pay as you use. If you can find a supplier willing to offer this to you, it potentially gives you huge amounts of flexibility and eases the cash flow burden immensely.
Start by identifying patterns to predict future demand. Ensure you keep a safety stock of critical items, but review this regularly to ensure it lines up with current demand, and not just historical data.
Best Practices for Efficiency
When it comes to your inventory management, negotiating with suppliers is key to boosting your efficiency. Trying to get better terms and reducing lead times (or at least getting them as predictable as possible), coupled with data collection and monitoring. Will help to improve efficiency across procurement, sales, and financing.
Start by integrating your inventory management with both procurement and sales data for a holistic view of your supply chain. Look for bottlenecks, regular ‘issues’, and start working out how these can be improved.
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So, there you have it.
An insight into evaluating your options. Hopefully that’s given you some food for thought.
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Thanks for reading, and see you next week.
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