Succeeding with inventory management can be challenging, particularly because of the many external factors that may thwart professionals’ efforts to keep things running smoothly. However, when people focus on working toward well-defined goals of inventory management, they’ll be more likely to overcome obstacles and keep their businesses profitable. Here are some things to strongly consider and strategies for achieving them.
1. Preventing Stockouts
Unexpected stockouts have far-reaching effects, from disappointed clients to decreased profits for stores that don’t have what customers want. Most successful retailers strive to keep in-demand items in stock at the appropriate times. That increases satisfaction, which should boost profits. Getting to the bottom of unexpected stockouts begins by understanding what causes them. For example, severe weather sometimes reduces the amount of fresh products at supermarkets.
However, farmers engaging with growers in different areas can help inventory managers reduce stockouts caused or exacerbated by weather severity. Similarly, some fresh items have limited growing seasons, making it necessary to secure agreements with producers early. It’s also helpful for inventory management professionals to review historical stockout data. Identifying patterns can let people avoid the same problems later.
Alternatively, a predictive analytics solution could warn early about products that will likely sell out. People will then have more time to react by communicating with suppliers and placing orders. Using a warehouse management system to make reordering suggestions is an option that may prevent prematurely replenishing products. It can bring other benefits, too, such as improved processes and elevated growth potential.
2. Maintaining Resilience Against Supply Chain Shocks
Predicting the type of supply chain shocks you’ll experience is not always possible. However, one of the goals of inventory management is to increase preparedness to give your company the best chance of succeeding despite difficulties.
Supply Chain Study
A July 2023 study of global executives found 77% had experienced an adverse supply chain event within the past year. Additionally, 44% believed more would happen over the next two years. The research also investigated the factors most likely to bring operational consistency during those shocks. The top two were transparency and reliability, but more importantly, whether stakeholders believed the companies had those characteristics. It was also advantageous if affected companies showed consistency during previous shocks. Stakeholders were then more likely to believe the businesses could handle more uncertainty.
Digital twin tools can help inventory management leaders see the effects of potential supply chain disruptions. They can then determine the best ways to handle those circumstances in real life. Digital twins can often show ramifications people hadn’t previously considered. They also let users run multiple scenarios quickly, accelerating overall preparedness and visibility.
Consider how consumables brand Mars uses digital twins across its 160 facilities to improve operational awareness. Some simulations reduce waste and enhance processes, while others help leaders plan for climate change and other situations affecting the company’s products.
3. Minimizing Excessive Inventory
Just as inventory managers don’t want to run out of things too quickly, they want to avoid having too many slow-moving or stalled items that people may never buy. Those products take up warehouse space better used for the things consumers want more or those that will bring profits to the company.
Participants responding to an April 2023 supply chain survey from CNBC identified excess inventory as a significant problem. More than half indicated they would keep the products in their warehouses. However, 27% said they were selling the items on secondary markets. Perishable products pose specific challenges due to their narrower usage windows. However, some polled parties mentioned they were donating them to charitable organizations and taking advantage of the associated tax deductions.
When secondary market sales and donations aren’t possible, people must destroy the products. However, they typically see that option as a last resort. Another survey statistic revealed warehouse costs result in the biggest inflationary pressures for 48% of respondents. It makes sense why many would want to eliminate extra inventory to make the best use of facilities that often have high rent costs.
Some high-street retailers in the United Kingdom launched their summer sales earlier than usual to reduce their inventories and encourage consumers to keep spending. These examples show that you can and should consider numerous options for moving excess inventory. Always prioritize the possibilities that allow your company to profit or enable someone else to benefit from what you can’t sell.
Determine what caused the excessive stock and consider preventive measures for the future. Review past data to see which items are most likely to sell, regardless of the time of year. Focusing on consumer staples rather than luxuries can work well during economic downturns.
4. Reducing Labor Shortage Impacts
Many warehouse managers struggle with maintaining adequate staffing levels. Failing to get that problem under control could impact order fulfillment rates, profits and more. High turnover worsens the matter. Many warehouse workers depart faster than managers can find replacements.
Finding more workers is only part of the challenge. It takes time to train those people and get them feeling confident enough in their roles to perform consistently for their employers.
A 2023 survey showed 53% of respondents believed schedule flexibility was one of the most appealing benefits that made warehouse employees stay. Additionally, 49% said they offered flexible schedules to find or retain workers. Another takeaway was that staffing issues caused a revenue reduction of more than 25% for 64% of those polled.
Automated technologies can help companies tackle unwanted outcomes caused by the labor shortage. However, succeeding with the goals of inventory management might require finding the root causes. One company used advanced analytics to examine more than 50,000 reviews to learn the most common reasons why its warehouse employees and drivers left.
Scheduling problems, a lack of work-life balance and the job’s physical nature were the top attrition drivers. Once the company implemented positive changes to address those matters, its worker retention rate rose by approximately 10%-15%.
Make a dedicated effort to address low pay or poor working conditions in all feasible ways. One of the goals of inventory management is to stay aware of problems and commit to solving them, preferably with employee input. Positive changes won’t happen immediately, but the first step is determining practical ways to overcome issues.
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To Conclude
These are some of the most desirable goals of inventory management, but this list is not all-encompassing. Take the time to assess your company and what would make it grow and thrive. Then, set meaningful and measurable targets to motivate everyone and help the business progress.