Markets can fluctuate significantly and that can sometimes force business to make rash decisions that are not always the best. Issue is, that often these decisions are very raw and aren’t analysed correctly, and therefore might seem good at the time, but can be detrimental for a long-term growth.
In an ever-changing and increasingly competitive marketplace, you need to have the stability of your data when you are making delicate business decisions, especially when any mistakes can end up harming your business. That is why it is important for you to have access to a detailed profile of demand across your business, which gives you a more accurate idea of future stock and other resource requirements.
A lot of manufacturing business have a lot of cash tied in excess inventory, like raw materials, finished and unfinished goods.
It’s tough knowing that you have an excess inventory with no real way to turn it into cash fairly fast. So, what can you do about? Here are 3 easy, actionable ways to improve your inventory management.
Improved inventory demand drivers
Inventory demand can sometimes seem like it is an erratic force of its own. To improve your inventory demand you need spend time to understand the patterns and drivers that are contributing to the increase and decrease of your overall product demand and then your inventory demand.
To aid improve your inventory management one needs to begin by looking at what patterns is the inventory varied by and what influences them. Similarly, understanding the leading drivers of such patterns will help you to get a more productive inventory. For example, introducing inventory related KPIs can lead to a better understanding of your requirements, outside influences and market, which all together adds up to a better and more prolific inventory.
Complexity is the enemy of a productivity! Too many, too complex product offerings can significantly slow things down for everybody from the finance department to project managers.
There are a few options you can employ to aid the complexity in your inventory. A) you can ask sales and marketing to kill off product variants. Or B) you simplify your reporting on inventory.
The idea behind the latter is that you can simplify overall reporting, that can then have a separate niche for their own requirements. This, however, only simplifies your and other team reporting rather than eliminate the problem, but if you can’t or won’t give the product up, it’s a great option for eliminating a level of inventory complexity.
Introduce Proper Systems
Finally, the ultimate way to improve your inventory management is to introduce proper systems. Inventory demand comes with just as much seasonality and variation just as much as your sales.
The more a manufacturing business can eliminate seemingly random demand, the more it can forecast and order to meet real, forecast demand. And to do all that, you need to invest in an up-to-date forecasting software, that is fine-tuned for your business.
You’ll still need safety stock, of course. But nowhere near as much of it and you will have less stock leftover!