What are your inventory costs on an annual basis? What about quarterly? Monthly? If you’re like most manufacturers and distributors, you spend more money than you’d like on inventory management and storage. These extra costs – when gone unchecked – can cause you to miss out on potential profit gains, taking a toll on the overall success of your business. In order to reduce the costs associated with inventory management, manufacturers and distributors need to do something different. Rather than relying on the same inventory management strategies you’ve always had and hoping for a different outcome, you can choose to do things differently to increase your chances of success.
The problem with traditional inventory management strategies (even the most advanced inventory management techniques) is that they are not meeting the expectations of manufacturers. Statistics show that many companies are experiencing difficulty reducing inventory costs with these strategies and, therefore, are looking for new ways to improve their efficiency, cut costs and improve management. By implementing barcoding solutions such as Sage 100 barcoding software (formerly MAS 90 barcoding / MAS 200 barcoding) and inventory management applications, companies can achieve the efficiency they need to transform their inventory management process and improve visibility across the supply chain.
New Technology Gives Inventory Management a Boost
Inventory management software, along with improved inventory management strategies, can help manufacturers control their inventory-driven costs, as well as addresses product demand volatility and supply chain complexity. While manufacturers have traditionally kept their warehouses fully stocked to ensure they have the necessary products on-hand, they are quickly realizing this is an ineffective strategy. Keeping your warehouse fully stocked will only result in costly overstock situations that your company could avoid. When you have too much inventory on hand, your overhead costs increase, space becomes an issue, and obsolete or expired goods remain on your shelves. When you think about all of the money that could be sitting in the bank rather than on your shelves, you will understand the true detriment of overstocking.
Understocking, however, is not any better. Understocking can lead to poor service levels, low customer satisfaction rates, and greater expenses in part due to rushed delivery costs. Manufacturing companies rarely get a second chance with customers and end up losing crucial business opportunities. Larger companies with complex and global supply chains often feel the impact more than smaller manufacturing companies. One small change in inventory levels can have an impact on the profit and loss of a large manufacturing company, and accurate forecasting becomes harder as supply chains grow more complex.
Effective inventory management can relieve the stress many manufacturing companies are currently under and help them maintain a fluid and profitable supply chain. By implementing Sage 100 barcoding technology and inventory management applications such as Scanco Counts, you can regain control over your inventory situation. Consider the following benefits of implementing barcoding and inventory management tools:
- Reduced inventory related costs
- Decrease inventory by 20 – 30 %
- Improved supply chain performance
- Greater visibility across the supply chain, leading to better decision-making
- More accurate forecasting
Practical Tips for Improving Inventory Management
While the benefits of Sage 100 barcoding solutions and inventory management applications sound great, you are probably asking yourself the following question: How can I realistically optimize my inventory and gain all of these benefits?
Effective inventory management can be achieved by following the five strategies outlined below:
- Analyze your current inventory situation. Take a look at your current and past sales, volumes, and delivery performances. Create a report in your WMS or ERP software detailing your situation as best as you can.
- Classify items into different categories. Create categories that make sense and can be handled with ease. Make sure that you define a strategy for each product segment.
- Calculate inventory forecasts according to each segment. Focus on each product segment and calculate your forecasts accordingly. At the end, you should have forecasts for each product category.
- Revisit replenishment policies. In order to optimize costs, you must optimize the replenishment of your products. Create different replenishment policies according to each item segment (or product categories).
- Collaborate with suppliers. Make sure that you work closely with your suppliers to create a plan that guarantees your items will be received in a timely fashion at as low-cost as possible. This eliminates the need for last-minute (often late) orders.
Inventory management (also known as inventory optimization) is a continuous process that requires constant adjusting and revisiting. With practical strategies and innovative solutions, you can reduce the costs of inventory management and uncover hidden profits. Contact us today to learn how our Sage 100 barcoding solutions and inventory management applications can help you reach your inventory goals.