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8 Ways Your Manufacturing Partner Should Approach Inventory & Supply Chain Management

Companies today must be fast and nimble enough to react quickly to changes in customer demand especially in the computer technology field where the products are getting obsoleted more quickly than ever before. Inventory Management is always the major concern to many companies, some saw inventory as just something that absorbs massive amounts of cash while others recognized that high inventories were an indication of other serious problems. Certainly, money tied up in inventory could be better spent elsewhere such as: new product development, expanding marketing & sales, modernization, re-engineering, expansion, debt reduction, and many other initiatives. How do you best manage your investment in inventory? As a business, you need to maximize your profits and cash flow and minimize your expenses. This needs to be done while still meeting on-time delivery deadlines and maintaining excellent customer service. Here are a few ways you can go about accomplishing these goals:

1. Generate more accurate forecasts and determine desired inventory levels

By closely monitoring forecasting and inventory management performance over time, you can uncover detrimental loopholes in processes that were causing more inventory to be on-hand than necessary. Making adjustments in inventory levels based on that monitoring will also minimize obsolescence as new technology is developed.

2. Improve supply chain management by streamlining the entire supply chain

Assess the processes of seasonal planning, weekly forecasting, and end-of-season analysis for your multi-channel business. Process improvement should improve planning and forecasting accuracy and lead to improvement in customer initial order fulfil rate and turnover.

3. Leverage your vendors to keep a safety stock for your regularly order items

Understand your strengths and weaknesses. Try to reduce the number of vendors you purchase from to gain leverage amongst them. Establish a closer relationship with your best vendors and keep them in the know about your company’s future direction, needs and expectations. You will end up with a partner whose genuine interest is in your success.

4. Reduce replenishment lead times

Advanced forecasting and planning for cyclical stock turns are the easiest ways to ensure you have the products you need when your customers need them. Lead time can be broken down into three stages: The review period, manufacturing time and transit time. Your supplier is largely responsible for the first two and may be able to suggest alternative methods for decreasing some of that time. In turn, that time is tagged onto order fulfillment. If you don’t find a way to minimize it, you’ll end up paying more for it.

5. Utilize warehouse management technologies to reduce mistakes and improve profitability

Real time updating of on-hand inventories is not just an option, it’s a necessity. This will provide your salespeople with up-to-the-second stock availability information so that inquiries can be answered quickly and with little effort. Bar coding will confirm that the correct product is picked to fill a customer order.

6. Eliminate obsolete items in your facility

Closely monitor any slow moving items. Even return them for vendor for credit if you can. If you can’t, ridding your warehouses of obsolete inventory is still a good policy, and good operating policies will result in good long-term financial results. If you don’t address those obsolete items now, your inventory will steadily increase over time. So, own up to obsolete items, get them off the books and use that warehouse space for productive inventory.

7. Understand your customer needs for lead time and availability

Do your customers need their entire order at once? Do customers request short lead times just because they can, not because they require it? The best way to meet your customers’ needs is to uncover needs versus wants. However, in today’s competitive environment, you just might find that you have to shorten lead times and increase availability just to keep up with competitors. Whatever the case, the more truth you find regarding your customers’ needs is critical to your success.

8. Align your organizations metrics

This is a critical and difficult step because each organization has departmental metrics that are at odds with each other. For example, the Inventory, Production, Sales & Service departments always have a conflict because their performance is based on a different set of standards. They all are valuable to the organization, but make it difficult to compare and contrast productivity across those departments.

Conclusion

Inventory is the benchmark of your entire supply chain. It reflects its agility and the only sustainable way to reduce inventory is to improve your supply chain processes. To do this, your organization needs an end-to-end view of the entire chain. You will need to begin plugging the holes across your extended supply chain with communication and understanding. Remember that supply chain management is an ongoing process; there is no finish line. After all, inventory management is not a stand-alone business process, It is a high-level process that should be integrated into other supply chain planning processes including, sales and returns, operations planning, production scheduling and supply action management. Inventory managers should support multiple business objectives and should have business integrated targets related to inventory levels, customer service levels, total inventory cost, and inventory quality. Today, the value that an organization offers to customers means having more than just a low price tag. Today’s customers demand short lead times, quality products, on-time delivery, good customer service & quick RMA turnaround. The consequence of failing to meet these demands will be lost business – something none of us can survive. New Call-to-action