A well-run supply chain perfectly estimates the optimal amount of inventory. A responsive company uses processes that can be quickly organized and reorganized to keep it running quickly at high quality—even when demand spikes or supply issues arise.
It can be difficult for companies to operate this way, and therefore many tend to overcompensate with higher inventory. But this only hides waste in several capacities of a company’s operations. Superfluous inventory can be reduced and even eliminated without impacting client satisfaction negatively with these tips:
1. Faster and Higher Quality Decision Making
It sounds simple, and of course, we would all be making better decisions more quickly (both in and outside of the workplace) if we could. But in this situation, there is an actual formula: Reduce response times to demand to lower your excess inventory.
A large amount of time is taken up by decision making, and then communicating those decisions to all employees and clients before moving forward. Take a long and hard look at your daily functions across every department involved in moving inventory out. Be creative with the ways in which you can move things along faster. Don’t be afraid to try something new.
Implementing algorithm-based decision-support tools like a CRM or ERP can automate many decisions for your business.
That may mean needing to involve more technology or update the current technology you are using. Many automated decision-support tools exist for this very reason, and can even be found in a robust CRM or ERP system (click here for software recommendations). They not only make decisions for you based upon what fits your business algorithm and client best but automate decisions for you when it comes to the average customer.
These technologies have advanced far enough to remove the need for you to make manual changes to your system when last-minute emergencies come up. Not only that, but they can also prioritize high-demand situations over others so you can spend your time making higher-level decisions for you and your team. But remember, faster decision making is not just a solution that involves your team alone. It is a network-wide problem-solving process.
2. Reorganize Demand Satisfaction
For most companies, one or two products account for the majority of sales. The long string of products outside of that often accounts for the majority of overstocked inventory. Errors in forecasting or any number of factors may be affecting the market’s demand for that inventory at the time. Either way, consider bundling products that go well with those top sellers to increase demand satisfaction, even if it means taking more time to configure the products for each bundle.
Your customers will likely be okay with waiting a little longer for a product that comes ready-to-use and bundled with everything they may need. Determine what compilation of products to offer customers, and what ways to distribute them.
That said, it is important to note what products revenue-to-inventory cost ratios are typically below average. Talk to your network about cutting those products or finding a new way to rebrand them.
3. Smaller Sets
It may be that you receive product once a month to replenish stock. Consider using smaller batches in higher frequency. This enables more frequent reevaluating of distribution and demand with the ability to relay this information to the rest of your company’s network.
This tip becomes increasingly more essential in today’s world of ever-changing trends, fluctuating demands, and divergent customer tastes. More frequent shipments will ensure your inventory is filled with more consumer-oriented products driven by the consumer market. It also provides your organization with the opportunity to spot opportunities when they arise, and to react to them far more quickly than you may have been able to before.
Manufacturing, replenishing, and shipping of stock in smaller batches at higher frequencies enables greater in agility in responding to shifting market demands.
4. Inventory Visibility
Knowing exactly how much you have of any given product at any point in time is a given, but this is not the only information that needs to be accessed and visible to the supply chain team. Company leaders are often unable to account for inventory in a timely manner, and while most companies are able to do this as a whole, few have a holistic picture of inventory from every aspect of the organization through every lens and are unable to dictate numbers to fellow colleagues or clients.
Open and transparent communication gets increasingly difficult when multiple third-party providers are involved. Data gets delayed or does not reach all parties. Streamline communication and provide transparency and visibility in order to ensure excess inventory can be used to alleviate deficiencies.
5. Communicate to Each Department Differently
Inventory numbers are important to know to serve customers best. But a customer service representative will use the information in a much different way than someone on your accounting team. Have your customer service team be selective when determining what customer segments receive more service depending on the product they may be searching for. Prioritize clients with greater profit potential in inventory and offer those clients a higher service level.
In today’s progressively active commercial world, there are fluctuating means of productivity and dexterity. There are countless chances to advance your proficiencies, from leveraging newer technology to employing well-known procedures in novel and dynamic ways to your entire company to meet the trials of transport, time, and unseen complications.
Neha Tandon is a writer for TechnologyAdvice. She has a Masters of Arts in Journalism from Syracuse University’s Newhouse School. With a background in marketing, public relations, and advertising, her true passion is for business journalism.