Companies may run into challenges when trying to optimize their inventory management. What are some of the best ways to improve inventory management in the manufacturing industry? In a recent chat for USA Manufacturing Hour on Twitter, Host Pavel Stepanov from VirtuDesk in Washington, led a discussion about optimizing inventory management.
Common Challenges
The chat started off with participants discussing some common challenges businesses face when trying to optimize their inventory management.
Kirsten Austin from DCSC Inc replied, “Manual processes. After all, we are only human, and mistakes happen.”
Host, Stepanov replied, "That’s so true!”
Gina Tabasso said, “supply chain issues.”
Rebecca Prox said the Digital Marketing Pro said, “Not using the right software, the wrong person is trying to do the organizing, or not even doing it at all.”
Host, Stepanov replied, “Totally agree! That's why we need the right ones!”
Ruby Rusine and the Social Success Marketing team said, “According to my research, one would be Overstocking.”
Host Stepanov replied, “Ooh. Forecasting and planning have something to do with it.”
Rusine replied, “Ohh... okay...”
Felix P. Nater from Nater Associates said, “I would say getting consistent buy-in from the workforce.”
Nigel Packer from Pelatis Online said, “I am learning.
Jasmine LaBelle form Velavu said, “Soooo many. A lot of businesses are using outdated inventory management systems. Like an excel spreadsheet. A lot of these "outdated" methods lead to decreases in productivity, more mistakes and lack reliability.”
Host, Stepanov said, “Some of the most common challenges include predicting customer demand, inventory holding costs, varying lead times for delivering goods, seasonal demand or changing trends, SKU proliferation, supply chain disruptions, accurate inventory tracking, adopting and integrating inventory management systems.”
Data Analytics
The chat then discussed how businesses can use data analytics to improve inventory optimization.
Rusine said, “Identifying trends and patterns in demand?”
Host, Stepanov replied, “Yes!”
Tabasso said, “forecasting?”
Labelle said, “Analytics can help provide insights so your business can make more informed decisions. Insights can help: reduce lead times, forecast accuracy, improve overall performance and asset utilization etc...”
Host, Stepanov replied, “Analytics is so useful.”
Prox said, “Use the data to find out what people are looking at/buying/asking questions about so you can understand best sellers or low sellers.”
Host, Stepanov replied, “That’s one!”
Brett from FreightPOP said, “Data analytics can help you keep track of what's moving and what's not, allowing you to organize your inventory more efficiently. This data can also help prevent shortages/running out of stock!”
Packer said, “Analyzing data and observing seasonality.”
Nater said, “Inventory management can assist in the ordering, processing, and storage of merchandise by having advance knowledge of customer's varying range of shopping inhabits”
Host, Stepanov said, “Businesses can build more accurate demand projections by studying past sales data, market trends, customer behavior, and other pertinent characteristics. Using advanced statistical models and machine learning algorithms, organizations can recognize patterns, seasonality, and demand factors, allowing them to optimize inventory levels accordingly.”
Technology Solutions
Next, participants share their thoughts on the role that technology solutions play in optimizing inventory management.
Rusine said, “Automating manual tasks”
Host, Stepanov replied, “Yup! This helps in increasing productivity.”
Rusine added, “This is also true of other business processes.”
To which Stepanov answered, “Exactly. Automation has leveled up productivity so much!”
Prox said, “Tracking supply and multiple users can work within technology.”
Host, Stepanov replied, “So useful!”
Tabasso said, “allows you to know where every product is in the warehouse and streamlines processes for fulfillment.”
Labelle relied, “great answer!”
Brett said, “They help you streamline processes, increase efficiency, and reduce human error, while also giving you total control over your inventory and providing you with the insights you need to make data-driven decisions.”
Austin said, “Shameless plug but we offer a real-time wireless WMS and Multi-Carrier Shipping solution for Sage500 Distributors and Manufacturers. Combined with good processes, it provides an accurate picture of all of your inventory related data. DRP and MRP work better!”
Host, Stepanov replied, “Love it! This makes inventory management easier!”
Nater said, “From what I've gleaned, optimizing inventory is directly tied to time management and enhanced employee performance in the handling of inventory and managing the supply chain?”
Host, Stepanov said, “Technology solutions help businesses optimize inventory management by giving them the tools and skills they need to expedite operations, improve visibility, and make data-driven choices.”
He added, “For example: Technology solutions make automated replenishment operations possible by using predetermined criteria or triggers. When inventory levels reach a specific point, the system can issue purchase orders or replenishment requests automatically, ensuring prompt replenishment and minimizing stockouts.”
Cost and Benefit
The chat went on to discuss how businesses can balance the costs and benefits of holding inventory.
Rusine said, “This one, I leave to the experts.”
Tabasso said, “Makes customers happy by always having stock for orders and warning you if there is a shortage”
Host, Stepanov replied, ” Totally agree with you, Gina. We hate when we need an item but the supplier doesn't have a stock for it. Customers will end up buying from a different supplier.”
LaBelle said, “Investing in an asset management platform is the first step. Then to minimize your inventory on hand, you can take a look at each SKU to forecast its sales potential.”
Host, Stepanov repied,” Great tip! There are a lot of asset management platforms out there such as @AssetPanda, IBM Maximo, and Oracle EAM.”
Austin said, “This 1 has been tougher for my distribution & manufacturing clients. Especially w/the Covid Situation. You don't want to keep non-moving inventory, but you need to keep enough inventory to meet your clients needs. Accurate info is very important & communication.”
Host, Stepanov replied, ” How did you go about it? Share it with us.”
Austin answered, “Get rid of manual processes. Real-Time Data Collection & sharing data is HUGE. The more inventory, production & shipping processes automated the better your data accuracy, then quicker decisions are made. Next start talking more to clients, vendors etc”
Prox said, “Just here for the answers.”
Nater said, “By only storing actual and projected inventory reduces turnaround replacement time.”
Host, Stepanov said, “You can use ABC analysis. Classify your inventory items based on their value or importance, typically using the Pareto principle (80/20 rule). Focus on efficient management and control of high-value items while adopting more flexible inventory policies for lower-value items.”
He added, “You can also track inventory levels, analyze data, and automate procedures by utilizing inventory management systems and software solutions such as Zoho inventory and Freshbooks. These solutions are capable of providing real-time insights, optimizing inventory replenishment, and reducing manual errors.”
Strategies
The host then asked participants to share some effective strategies for reducing excess inventory and minimizing stockouts.
Packer said, “Consignment stocking at the clients?”
Host, Stepanov said, “You got it.”
Host, Stepanov said, “Utilize inventory management systems and analytical tools to gain real-time visibility into inventory levels, demand patterns, and performance metrics.”
He added, “By leveraging data insights, businesses can make informed decisions on inventory replenishment, identify slow-moving items, and take proactive measures to prevent stockouts and excess inventory.”
Flexibility
Participants then had a discussion on how businesses can create an inventory management system that is flexible enough to adapt to changes in demand and supply.
Packer said, “The big 5 supermarkets in the UK have developed a finely balanced stock management system based on sales at the checkout. they can restock from the warehouse within 2 hours. They also watch the weather and what is on TV such as cookery shows and sports events as these have a huge effect on demand.”
Host, Stepanov said, “Whoa! That's a good one, Nigel.”
Host, Stepanov said, “Implement lean inventory management principles to minimize excess inventory and reduce lead times. Lean practices such as just-in-time (JIT) manufacturing, Kanban systems, and continuous improvement help streamline operations, optimize inventory levels, and improve responsiveness to changes.”
Collaboration
The chat concluded with a discussion on how businesses can collaborate with suppliers and partners to improve inventory optimization
Packer said, “I would consider that it should be normal business practice to have a close relationship with suppliers as well as clients. Regular communications to keep the supply conveyor running smoothly.”
Host, Stepanov said, “Engage suppliers and partners in collaborative inventory planning discussions. Share inventory turnover goals, target service levels, and other relevant metrics. By aligning goals and strategies, businesses and their partners can jointly optimize inventory levels, reduce holding costs, and improve customer service.”
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