Inventory Management Processes: How to Convert Inventory From Cost to a Competitive Advantage
Think about the top driving costs of inventory management. Slots must be optimized and moved. Pick tickets must continue to flow. Managers must meet with vendors to get the best wholesale price. Yet, this only scratches the surface of inventory carrying costs. As a result, supply chain managers associate inventory management with rising costs, and product price points must reflect these costs in controlling and moving inventory, reports BCG.com. However, warehouse and distribution center managers can convert inventory management from cost to a competitive advantage through these inventory management processes.
Benchmark Inventory Management Processes
Supply chain managers need to know what is and is not working and why changes are necessary to lower costs. In other words, they need to benchmark current inventory management processes to determine their standing against competitors. This should include benchmarking of physical inventory carrying costs, labor costs, and transportation costs, as well as adherence to existing inventory goals.
Set Inventory Management Goals
Warehouse managers must set slotting optimization and inventory control goals for employees, the company, vendors, transportation providers and everyone else involved. However, goals need to be realistic.
For example, increasing goals for the number of completed pick tickets per employee is only possible if your organization implements waveless picking, depending on your current ebb of lulls and peaks. In other words, your facility may need a technology upgrade to make new goals reachable.
Use Technologies to Track Assets and Goals
Similarly, using goals to reduce inventory carrying costs requires performance measurement, and modern technologies have the potential to track assets and goals alike. Furthermore, automated technologies can simplify the tracking process and ensure accuracy in performance measurement and reporting.
Align Inbound and Outbound Strategies
Part of the problem with inventory management costs derives from inaccuracies and inconsistencies between inbound and outbound logistics providers. This contributes to overstocking and understocking, and vendors or transportation network providers must know what is coming in and going out of your facility to ensure a smooth operation. In other words, warehouse managers must align inbound and outbound shipping strategies and put away and picking must align as well.
Partner With Other Supply Chain Entities
There is a general school of thought that working with competitors is bad for business, but this is untrue. Warehouse managers can successfully convert inventory management to competitive advantage by working with other supply chain entities, or collaboration, explains Manufacturing Business Technology magazine.
For example, other warehouses may have overstocked product in high demand within your warehouse, so managers can tap the supplies and resources of other warehouses and still ensure a positive return on investment for all parties.
Train Employees to Use All Inventory Management Systems
While newer warehouse and order management systems (WMS and OMS) reduce overall inventory carrying costs, they lack value if your employees and staff members do not know how to use them. Train all users on new systems, and ensure existing employees complete training when implementing new systems. Fortunately, newer systems are less complicated than their predecessors, so training requirements may incur lower costs than historically seen.
Follow Through on All Steps
The path to converting inventory management from cost to competitive advantage can be effective, but you must follow through on all steps and in the right order. Failure to do so could result in added costs, resulting in higher per-product costs, pushing competitive advantage toward your competitors.