Inventory management is more than deciding where to park raw materials or finished goods. It involves aspects beyond the physical location of an item, including consideration for travel time, stock levels, and much more.
Getting necessary materials to manufacturing partners on time requires strategic inventory management. Without it, customers cannot get the product they need at the time that they need it.
Let’s dive into the complexities of inventory management — and how to improve the process.
Why Good Product and Inventory Management Matters
Controlling inventory is essential for an effective business. The primary goal of inventory control is to maintain visibility of stock levels and identify procurement needs. Without that visibility, you can run into out-of-stock situations, slowdowns, and unhappy customers. However, good management practices also lead to other positive outcomes, such as:
- Steady production flow. Maintain the appropriate procurement pace or manufacturing to meet demand and future forecasts.
- Clarity about problems, obstacles and options. Quickly identify bottlenecks that may be present or have formed and take steps to correct them. Realize your turnaround times.
- Reduced costs. With a clear grasp on inventory, you can avoid over-ordering that requires more storage space or longer shipments.
- Increased profitability. Inventory management illuminates gaps and opportunities in your brand’s efficiency which, once remedied, can drastically improve profitability.
- Satisfied customers: Strategic inventory management improves outcomes for customers and partners, creating strong and loyal relationships.
Embracing Technology to Streamline Operations
The right tools are essential for your inventory management procedures. Today, a wide range of advanced inventory management software is available. Enterprise Resource Planning (ERP) platforms are imperative tools. The software helps you capture and visualize critical data points, giving you a broader perspective on your inventory.
There is also a growing arena of AI and machine learning tools to support advanced inventory management systems. These platforms derive fresh and innovative insights from large volumes of data. Such solutions provide you with information about your current inventory levels, and you can use these tools to ingest historical data to make more innovative forecasts for the future. Good technology is a must-have foundation for your inventory management system.
Types of Inventory Management Strategies to Know
What approach will yield effective inventory management for you? Several techniques are used across industries today.
MRP: Materials Requirement Planning
MRP inventory management techniques rely on future forecasts. In order to anticipate the level of sales within a given time frame, you need access to historical data. By predicting what you will need immediately, you take steps to order and stage the necessary materials to meet projected orders in time.
JIT: Just in Time
Typical across many industries requiring plastics, JIT manufacturing involves maintaining a precise level of materials and products to meet the level of demand you expect at a particular point in time. Items are produced just in time to meet that demand, not before or after.
EOQ: Economic Order Quantity
In areas where demand is steady and reliable, EOQ aims to strike a balance between meeting demand and preventing the acquisition and storage of excess inventory. We strive to minimize the number of orders they place by ensuring each new order contains enough to replenish stock levels as needed.
Exploring Key Questions in Inventory Management
While each management method has pros and cons, there is more to consider. You’ll need to address questions distinct from management styles and software solutions.
Where Around the Globe Should You Plan to Store Inventory?
With today’s global supply chain, it’s more likely that you will work with international manufacturing partners. Once manufacturers complete the items, storage of those items — and any additional materials or items needed for manufacturing — is top of mind.
When exploring warehouse inventory management, factoring in time and the cost of moving goods is essential. In general, you should try to position production inventory as close to points of production as possible. Otherwise, you risk a disruption that cascades into the creation of products you need to sell.
How Close to Your Manufacturing Locations Should the Inventory Be?
Positioning stock after production is tricky, too. Keeping your inventory in-country is useful for maintaining agility in your supply chain. However, you need to factor in elements such as shipping times, especially overseas. A complex supply chain may have several storage stages. A location close to the manufacturer can provide you with a warehouse to call upon to meet long-term needs, but a closer warehouse translates into reliably faster turnarounds.
How Much Inventory Should You Keep On Hand?
The answer to this question largely depends on your inventory management solutions, level of demand, and forecast accuracy. No one-size-fits-all solution exists for how much product to keep on hand. However, as mentioned, effective use of ERP software and professional support services can help you compute numbers that make the most sense for your needs.
Leverage Expert Guidance for Superior Inventory Management
At Reliant Plastics, we have decades of experience solving the challenges in your industry. With extensive strategic sourcing and inventory management capabilities, we can support your efforts to improve efficiency in this area. Contact us to learn more about how our team can streamline your inventory management program and accelerate positive outcomes.
