Optimizing inventory is one of the keys to making sure that a business is both agile and profitable. Inventory needs to be tracked and stored carefully, and a company should not stock more inventory than it needs at any given time. When companies pay close attention to their inventory optimization, they will be able to take advantage of cost savings and capital production. Verusen discusses the top 7 ways to optimize your inventory with proper inventory control systems.
1. Avoiding Wasted Working Capital
When you optimize your inventory, you can avoid wasting working capital. Companies large and small have a great deal of money tied up in their inventory, which they may or may not be able to sell depending on economic conditions. Since today’s economy is so volatile, this is a particular risk that companies need to be aware of today.
Inventory optimization means making sure that you have only the goods on hand that you need in order to perform your vital functions. This “lean” inventory practice has worked for years, but in the current economic disruption, some companies have found that they have too much or too little inventory on hand. Manufacturers of household goods have had this particular problem frequently.
2. Make Sure Your Database is Strong
Optimizing inventory is accomplished by creating a strong and robust material data. If a company does not have a clean and trusted data foundation that provides accurate information about all of its inventory, it may make poor decisions based on this information.
It is necessary to make sure that all departments within the company know how to use the inventory control system. Otherwise, bad data could be introduced into the system, causing people to be misled about the inventory levels.
3. Ensure Lack of Duplication
Another important consideration is the removal of duplicate material data. Companies waste money on buying products for separate departments. A central procurement office should be responsible for buying everything and negotiating the proper prices. For example, if a company needs to buy masks and gloves, they should not let each department source them on their own. It is likely that they will get a better price by presenting a larger order from all departments.
4. Manage Inventory Levels
One of the best ways to manage inventory levels is to forecast what types of products you will need and when. This supply and demand forecasting can be put into place using AI systems. Your company’s needs may fluctuate seasonally, or they may depend on other business trends. Setting up a forecasting system will enable your company to stay ahead of the curve when it comes to inventory decisions.
5. Align Inventory Data with Master Data Management
Sometimes a lack of data management or data governance (MDM) can hamper a company’s inventory control needs. Important data could be overlooked when it is not stored properly. Material data, in turn, can help a company make important business decisions. When plans are inaccurate, it can cause a waste of money and time.
6. Align Goals to Overall Objectives
When planning inventory levels, businesses need to understand that a lower order-to-delivery cycle time will be an advantage, they should also know what goals they are working toward. Adhering to consistent internal goals means that a company will be able to move together as one. If goals are not consistent, the relationship between the supplier and the company will be strained.
7. Develop an Inventory Plan
After developing a strong material data structure and aligning goals, a company will be ready to develop its inventory control plan. Inventory planning involves the number and type of items, the open orders, the lead time required, the average cost, and the bill of material.
The materials need to be classified into three segments: raw goods, works in progress, and finished goods. MRO (Maintenance, Repair, and Optimization) data needs to be included as well.
Raw materials need to be classified with regard to how they are used in the manufacturing process. Companies will need to set up their minimum order quantities and safety stock levels in accordance with their overall plan.
Executing the Plan
When the plan is put in place, every employee who comes into contact with the inventory for any reason must be trained how to use it. Duplication of effort could be wasted if departments try to track inventory on their own. Ensuring that everyone can use the inventory control system means that the data will stay clean and can be used to make decisions far into the future.
