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How to Improve Inventory Management in Your Operation
By Angela Carver
Why Is Inventory Management Critical?
In a study conducted by the Aberdeen Group entitled “What Has Changed in Wholesale Distribution: 2015 & Beyond” supply chain businesses reported that updated inventory management practices provide benefits such as:
• 95.4% of outbound orders delivered to customers complete and on-time• 0.5% decrease in per unit cost in 2014• 7.5% decrease in out-of-stock occurrences
Integrated data networks made supply chain businesses:
• 1.7 times more likely to find and access data needed for decision making• 1.34 times more likely to have online visibility into shipment status• 1.67 times more likely to have logistics collaboration with suppliers
Where Should You Start?
Utilize Real-Time Analytics
Integrated supply chain management software can provide your operation with business analytics in many forms. This data can provide your business with a real-time view of what inventory is on hand, the future billing instances for those items, the cost to carry that inventory, the efficiency of your staff and much more vital information.
These analytics will help your team to establish a more holistic inventory control plan. This will provide your staff with the ability to optimize your supply chain network, potentially reducing overall costs.
Focus on Industry Best Practices
Using real-time analytics, analyze current business processes and capabilities and compare those to recorded, measurable industry best practices. This will help your business to identify operational gaps, areas of improvement and areas where you perform at industry standard levels.
Once you identify these gaps as well as areas needing improvement, your team can make adjustments to operational processes as needed to better meet industry best practices.
Areas that should be evaluated include:
• Receiving• Order putaway• Order picking• Order packing/cartonization
• Loading/staging• Shipping/rate shopping• Data sharing/communication• Technology usage
Monitor Accuracy of Inventory Processing
Many supply chain and manufacturing businesses not utilizing inventory management software make the mistake of trusting the work of suppliers when receiving new product. To save the labor hours required to check all incoming shipments, many forego the verification process and presume that the correct quantity was received.
Not closely monitoring orders received from suppliers can leave your inventory counts off. This can increase out-of-stock instances and manufacturing component shortages.
Utilizing inventory management tools such as warehouse management software, inventory tracking software or inventory management software and automated data collection tools can reduce these types of inventory inaccuracies.
Consider Integrating Data Capture Tools
The ability of your team to effectively manage inventory is based on the stability, accuracy and availability of inventory data. This data foundation can be strengthened with the integration of data capture tools into your warehouse management system (WMS) to create a constant flow of data throughout your organization.
By eliminating manual processes, you can opt for automated data collection. This will help your team to make educated business decisions.
Some data capture tools available include:• RFID tags/portals• Barcode scanners• Mobile computers• Voice-directed technology
Open Lines of Communication
In many supply chain businesses, operations suffer due to lack of communication with suppliers, customers and internal team members.
By utilizing supply chain technology such as WMS solutions and automated data collection, a constant flow of data will be accessible by all team members and customers. This seamless flow of real time information can help to increase communication effectiveness.
Other technology options such as electronic data interchange (EDI) and advance shipping notifications (ASNs) help to increase ease of communication between all parties.
Implementing these types of technology to increase communication effectiveness can also lead to improved supplier relationships and increased customer satisfaction.
Archive Audit Trail Data
As data is collected using warehouse management software and automated data collection tools the activity data should be stored. This activity should create a detailed audit trail, showing all inventory handling, movements, etc.
Having this detailed audit trail data accessible will prove useful in instances of product recall, theft concerns, quality assurance monitoring and much more.
Monitor Inventory Flow Through
Employing the real-time analytics collected using your ADC network can help your supply chain business to develop inventory flow projections. Usingreporting functionality allows your team to view historical data on outbound orders and can help to predict required seasonal inventory levels.
Monitoring these seasonal trends helps your business to more accurately estimate needed inventory and can help to reduce excess on-hand inventory, associated carrying costs and out-of-stock instances. This will help your business to avoid order fulfillment disasters that could potentially damage your reputation.
Re-Evaluate Operations Regularly
Do not let your operation become complacent with benefits seen from improvement initiatives. It is important to regularly evaluate your operations. Check your operational processes carefully and benchmark against industry standards. Focus on the continuous improvement of your operation.
ConclusionUse of effective inventory management practices and real time information visibility can help to provide numerous benefits for your business including:
• Reduction in out-of-stock instances and manufacturing component shortages
• Improvement in the quality of decision-making for your business
• Enhanced communication effectiveness across your business and supply chain
• Reduction in inventory carrying costs
• Greater responsiveness and accuracy when dealing with product recalls
• Reduction in inventory theft
• Enhanced customer satisfaction rates
