When you talk to any manufacturer no matter how large or small about their concerns, improved inventory management is bound to be a part of the conversation. To celebrate manufacturing day today, we thought it would be beneficial to take a closer look at how inventory strategy keeps evolving using an infographic from Arkieva based on research conducted by Aberdeen.
[Read More: My Biggest Mistake: Inventory Levels are the Thermometer for the Management of the Company]
Personally, my first lesson on how costly inventory management could be, came when I was younger and working as a ‘shop assistant’ at my mother’s shop which specialized in beverage distribution. I vividly remember a year when my mom had loosely forecasted an increase in sales for the holiday period for Coca-Cola products based on historical sales. That year, sales dipped, and my mom was left with an overstock and had to use demand shaping techniques such as a “buy-one-get-one-free promotion” and free add-ons for other faster-moving products to sell off the excess inventory. I also remember drinking so much coke; I was in “sugar-heaven” as a child. It is evident today that if some amount of demand sensing techniques had been used by tracking market signals that pointed towards a change in the demand pattern, adjustments could have been made to meet the change in demand.
My example with my family was on a small scale. One shop with just a few products. The mismatch between demand and supply was on a smaller scale. However, proper inventory management plays an invaluable role in the overall business health for any stock holding business. For manufacturing businesses that are upstream within the supply chain, getting forecasts right becomes even more critical because there is often no visibility into the Point-of-Sale data to sense when demand is swaying one way or the other.
Technology solutions today have evolved the way manufacturing businesses approach inventory strategy and has improved visibility even for manufacturers that do not sell directly to end users. With that said, not all inventory management software solutions are created equal. In our upcoming webinar on “3 Must-Have Inventory Management Software Features,” we discuss some key inventory management modules or features for optimizing inventory levels. These include access to data for visibility and analytics, inventory policy setting, inventory target setting, as well as long and short-term inventory projections based on capacity.
[Read More: Creating an Actionable Plan for Unlocking Working Capital with Inventory Optimization]
Inventory Management Strategy Evolution: Using Multi-Echelon Inventory Optimization
In this inventory management post from Solventure CEO Bram Desmet, he discusses his results from a workshop to discover what drives excess inventory or stock outs. Through the exercise, he discovered a variety of factors that run deep within the organization are what cause excess or shortages. It was something that spun from procurement issues all the way to production. The conclusion from that exercise was that proper inventory management stems from a better process management throughout the organization. Essentially, you may not be able to get the results needed if you focus on only one aspect of the supply chain to help with inventory management.
Multi-echelon inventory optimization falls under the practice of using a more holistic approach to inventory management. Advanced inventory optimization systems like the Arkieva Multi-Echelon Inventory Optimizer, have incorporated this way of inventory management to help businesses decide where and when to store inventory while remaining at desired service levels. As shown in the infographic above, businesses that move towards the use of multi-echelon inventory optimization techniques often find themselves with cost savings of 20-30%.
As we celebrate Manufacturing Day today, it might be time to take a closer look at your current inventory strategy.
Is it evolving to reduce costs continuously or is it static?
Register for the upcoming Inventory Optimization webinar additional tips.
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