Inventory control is no doubt a critical aspect of procurement and supply chain management.
Striking the right balance between avoiding stockouts and minimizing overstock can be challenging, but with the right strategies, it is achievable.
Here are some best practices for effective inventory control, using practical scenarios to illustrate each strategy;
📍Forecasting Accuracy: Your company sells seasonal products, and you're tasked with predicting demand for the upcoming holiday season.
Action Point: Use historical sales data, market trends, and insights from sales and marketing teams to improve forecast accuracy. Even better, invest in advanced forecasting tools and software to help predict demand more accurately.
📍Just-in-Time (JIT) Inventory Management: Imagine a scenario where your company manufactures perishable goods with a short shelf life.
Action Point: Implement JIT inventory management to minimize holding costs and reduce the risk of overstock. Work closely with suppliers to ensure timely deliveries and maintain lean inventory levels.
📍Safety Stock: Let's say your company experiences unexpected spikes in demand due to unforeseen events or market fluctuations.
Action Point: Calculate safety stock levels based on lead times, demand variability and service level requirements. Regularly review and adjust safety stock levels to account for changing market conditions and demand patterns.
📍ABC Analysis: Your company carries a wide range of products with varying demand levels and profit margins.
Action Point: Conduct an ABC analysis to categorize inventory items based on their importance and value. Allocate more resources and attention to high-value items while implementing cost-effective strategies for low-value items.
📍Inventory Tracking and Management Systems: Imagine a scenario where your company struggles with manual inventory tracking processes, leading to errors and inefficiencies.
Action Point: Invest in an advanced inventory tracking and management system that provides real-time visibility into inventory levels, locations and movements. Automate routine tasks such as inventory counting and replenishment to improve accuracy and efficiency whilst freeing up valuable time.
📍Supplier Collaboration: Envision a scenario where your company relies on multiple suppliers for critical inventory items.
Action Point: Foster strong relationships with key suppliers and establish open lines of communication. Collaborate with suppliers to optimize order quantities, lead times and delivery schedules, ensuring timely replenishment of inventory without excessive safety stock.
By implementing the strategies outlined in this blog post, you'll be able to improve inventory management practices to drive better business outcomes.
Need procurement specific training? Reach out to support@efemini.com and we'll get you sorted.
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