TitleOptimizing Inventory Management: Strategies for Success
- 21 Jul 2023
The importance of inventory management cannot be stressed enough. Effective inventory management allows brands to fulfil orders on time and accurately. And as brands grow out of small warehouse space and into larger facilities, so does the need to efficiently manage inventory.
Reducing stock-outs can cut down inventory costs by 10%, according to Zebra statistics. Despite the benefits of inventory management though, many businesses don’t prioritise it. While the picture in the UK is unclear, in the US, 43% of small businesses don’t track inventory, and 34% of business have shipped orders late because they sold products that weren’t in stock.
In this guide, we explore the main challenges faced within inventory management, before looking at three key ways you can transform your approach for the good of your business.
Key challenges in inventory management
There are all manner of challenges faced by B2B businesses in managing inventory. These include managing:
Variable product demand – which can make purchasing and storing stock difficult to effectively manage.
Stock outs – which can lead to lost business, unhappy customers, or accepting orders which cannot be fulfilled.
Excess inventory – leading to higher warehousing costs over a long period of time.
Warehouse space constraints – preventing your business from meeting spikes in demand or scaling up.
Inaccurate data – hampering decision-making regarding restocking and order fulfilment; a big problem if customers have requested delivery via a same-day courier.
Low digitisation – old-fashioned inventory management approaches, such as using paper records and infrequent stock checks, can reduce business efficacy and growth prospects.
What can businesses do to tackle these inventory management problems? Below, we’ve brought together three of the most important approaches available to proactive managers.
Solution 1: Inventory optimization techniques
There are several inventory optimization techniques you can employ to boost your inventory management. Firstly, implement demand Forecasting and planning using previous sales data. Perform an ABC analysis on your inventory so you can prioritise them by value and importance and optimise your inventory in kind. And build a safety stock of the most important products in your inventory so you can safely meet customer demand during peak sales periods.
Solution 2: Collaboration and communication
The importance of collaboration and communication among stakeholders, including suppliers, manufacturers, distributors, and customers, cannot be understated. Through regular discussions, information sharing, and strategizing in quiet periods, you and your stakeholders can foster a much stronger and more robust relationship that helps guarantee business continuity and meet your shared business goals.
Solution 3: Improvement and performance measurement
The final approach to inventory management we’ll discuss today is the process of continuous improvement. As industry 4.0, digitisation, artificial intelligence and all manner of other recent innovations have shown, technology is advancing at an ever-more-rapid pace.
As such, you need to be in a constant state of improvement. Measure the performance of current inventory management approaches, keep an eye on the horizon, and implement improvements when gaps emerge between your performance and that of your peers.