Too much stock results in unnecessary warehousing costs, while too little can lead to lost sales, so there’s a lot of money at stake. Data shows that ⅓ of businesses will miss a shipment deadline because they’ve sold an item that wasn’t actually in stock. This is typically due to low visibility in inventory management flows—sales, marketing, and fulfillment teams aren’t sharing real-time sales and inventory data.
Inventory management represents an important decision variable at all stages of product manufacturing, distribution, and sales, in addition to being a major portion of current assets. In fact, inventory often represents as much as 40% of total capital at industrial organizations.
If you neglect inventory management, you run the risk of production bottlenecks, which can result in irreparable reputation loss for companies operating in competitive industries.
Here’s how you can optimize your inventory management to kick butt.
What is stock control?
Stock control means ordering enough stock of a product that sells well. To achieve this, you must have high-quality data for tracking item cost, sales forecasts, and sales figures.
Good inventory management comes from accurate demand forecasting. Reliable forecasts are needed for decisions around assortments, purchasing volume, and safety stocks (extra stock which is stored in the warehouse to prevent an out-of-stock situation). Use historical data together with knowledge about inventory turnover, current order levels, and expectations for future sales.
Here are the most important data points you need to know at all times:
While this might sound like needless paper-pushing, you’ll finally understand the importance of having procedures in place the next time a huge shipment arrives and you’re out of warehouse space because there’s a pile of deadstock nobody knew what to do with. Standardizing processes helps you run a tight ship.
Here are some things to look out for:
Having a close relationship with your suppliers enables you to accurately understand their capabilities and limitations. The goal is to source a reputable supplier who can produce a quality product and turn around large orders on short notice. Purchasing cheap parts or raw materials will only lead to defects, reworks, and scrap parts. When comparison-shopping suppliers, ask about fulfillment times, minimum order value, and comparative pricing.
RFID chips enable businesses to track inventory whereabouts in real-time. RFID for inventory management requires a scanner that uses radio waves to communicate with an RFID tag. The tag contains a microchip that allowers the reader to scan data and write data to the tag for real-time tracking.
These tags help to automate and expedite inventory checking as there is no manual data entry. Also, RFID tags do not require “line of sight” scan like barcodes; it is possible to read them at a distance for fast inventory processing. However, note that unlike barcodes, which can be read by a mobile app, RFID tags can only be scanned using RFID readers.
Inventory management software provides quick and easy access to detailed inventory and ordering information. When you use a CMMS, you can also keep track of inventory data for your maintenance operations— including parts, tools, and other equipment needed to repair or replace major assets. Remember, preventive maintenance hinges on proper inventory management: you need to have the right parts on hand ahead of an asset’s scheduled maintenance.
Poor inventory management will only derail preventive maintenance, create a maintenance backlog as technicians wait for parts to arrive, and lead to more reactive maintenance down the road. This is why inventory management is a crucial aspect of reducing unscheduled downtime.