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For companies with outdated or manual inventory management systems, lack of certainty about the accuracy of inventory levels can make managers and decision-makers apprehensive during busy times. If calculations and inventory management practices are off, companies may find themselves with stockouts. This can cause customers to cancel orders, or force the company to utilize expedited shipping which drives up cost. Or they may find themselves with too much stock, tying up working capital, and reducing cash flow.
One study conducted by consulting firm The Hackett Group, Inc. found that the largest 1000 US companies alone had as much as $1.1 trillion dollars tied up in inventories. And that number must certainly be higher when considering all companies including small and medium-sized businesses (SMB). To achieve optimal inventory levels and meet service level goals, businesses are looking to inventory optimization to ensure the right stock levels and to reduce the amount of working capital required to run their operation.
This optimization isn’t just improved administrative functions such as inventory counting or cycle counting. It means both demand and supply volatility must be included to guarantee the right inventory.
Any assessment of improving inventory management will include common sense steps to reduce time, labor and physical process steps. One example is the warehouse layout.
Since the average sized warehouse today is 180,000 square feet compared to 127,000 square feet 14 years ago, an optimal layout will mean fewer steps for staff members and reduced time on task. But a well-designed layout and physical process changes only go so far. And as warehouse size has increased, the need for automated warehouse management platforms that leverage real-time data using advanced analytics is even more important.
Another example is improving vendor relations. With complex supply chains sometimes stretched globally, vendor management is key to inventory success. By leveraging history and scale, automatic reviews and contract renewals can be coupled with standardized communication channels to set the pace for improved relations and improved cost.
Physical and administrative changes can only go so far in optimization. And most of these changes can be addressed through continuous improvement methodologies designed to do just that. But to truly improve inventory management, companies should consider inventory planning and automation software to introduce systemic changes within the organization. Here are 6 tips that improve inventory performance with automated software and ensure that companies have the right inventory at the right time.
Today’s inventory planning and optimization software can be linked to key business systems such as an ERP to un-silo data and standardize it across the organization. This improves timing and quality of transactional data making it possible to automate purchasing and push orders to the company ERP system seamlessly. Time-phased inventory can be accurately forecast across the entire organization to automate replenishment timing and quantity.
Improving inventory management doesn’t need to be as stressful as in the past. By deploying advanced inventory planning and optimization software, companies can take command of their inventory and manage it to fulfill service level goals and drive value through the inventory process. DemandCaster delivers powerful, easy to use supply chain planning software to optimize inventory and maximize system efficiency and financial performance.