Inventory Management Best Practices to Quickly Get Your Inventory in Line

In today’s fast-paced and constantly evolving manufacturing environment, it’s becoming ever more challenging to secure and maintain just the right amount of inventory to meet production requirements.

In today’s fast-paced and constantly evolving manufacturing environment, it’s becoming ever more challenging to secure and maintain just the right amount of inventory to meet production requirements.

Customer buying habits are changing rapidly, causing manufacturers to scramble to enter new markets and shift away from some of their more traditional product offerings in order to keep pace with the ebb and flow of demand. At the same time, brick-and-mortar stores have been under increasing pressure to consolidate operations or close underperforming outlets being hammered by online purveyors. Even B2B distributors, still in tight partnership with manufacturers, now face new competition from online counterparts like Amazon and, in some cases, from their own manufacturing “allies” that have begun offering direct sales options.

Such chaotic market trends are increasingly creating confusion and havoc within current manufacturing operations, especially in strategic inventory management and procurement.

Here are four major but very doable steps and manufacturing inventory management best practices that allow today’s beleaguered manufacturers to regain pinpoint control of their supply practices, material availability and real-time data analysis.

Step 1: Conduct a Strategic Inventory Review

Take immediate steps to learn how personnel across all departments, divisions and locations are making inventory replenishment decisions. Require the daily tracking of the movement of inventory for all materials in stock.

When reviewing stock recommendations and decisions, make certain that departments are using comprehensive lead-time analytical techniques on a regular basis and not just relying on easier and less thorough data. Some planners might only consider supplier on-time performance results, for instance, which do not factor in the potential variabilities that can impact lead times resulting in unintended material shortages or delays when it comes time to purchase new stock.

That’s critical since lead times in the supply chain can shift in an instant, whether triggered by changes in supply, demand, production difficulties or hiccups while in transit. In addition, while organizations understand that product demand is subject to its own set of changing circumstances, managers should also pay close attention to how such variabilities affect materials procurement decisions, an area where missed signals can lead to poor procurement strategies and put entire operations at risk.

Since ongoing reduction of variabilities in the entire procurement process is critical for success, it is worthwhile to take steps to align procurement staff with the key suppliers and others up and down the supply chain.

Another good practice for the procurement department going forward is to implement an effective training program for all staff involved in inventory control and management, so that everyone understands the procedures necessary to assure accurate procurement levels, including the ability to spot and handle market fluctuations, demand changes and lead-time variables.

Step 2: Know Exactly What You Have (and Where to Find It)

One plant’s scrap is another plant’s treasure. Overstocked products and obsolete materials housed at one plant might easily satisfy next month’s production requirements at another company facility.

Very often, manufacturing plants operate as individual units rather than as part of a manufacturing team. In such cases, they continue to hold on to inventory that has not been used in many years and may no longer be needed at their particular location, but overlook the possible need for the same material at a sister facility.

Internal teamwork, aided by visibility of materials across the company network of facilities, can help identify opportunities for stock transfer, thus reducing that plant’s future purchases and overall company inventory levels.

Such visibility of inventory data across the company presents a major savings opportunity, especially for manufacturers with plants and operations in multiple locations. 

Step 3: Clean Up Your Data — Now!  

Most plants have significantly increased their technological capabilities over the past few years, enabling them to facilitate how tasks are performed and increasing speed and efficiency.

However, even the greatest technology can be paralyzed by the entry of dirty data, possibly input incorrectly and into the wrong place, or data that doesn’t factor in the realities of today’s market and updated customer needs. Poor data often involves duplicate entries across departments and people, the downstream effects of which could lead to millions of dollars of excess inventory.   

Bad data can also be the result of errors placed in spreadsheets and placed in siloed systems but later manually calculated into a corporate database, skewing totals that are viewed as gospel in the final tallies.

No single person or department may be at fault—it could just be due to today’s hectic business environments. For example, plant buyers, maintenance managers, operations supervisors and other key personnel, all in a rush to meet key metrics as part their day-to-day responsibilities, might not have the time to sift through dirty data and potential duplicate materials before placing orders. This can lead to separate departments ordering materials that are already in stock, possibly labeled differently and not easily found. These are all unintentional but very costly mistakes.

Maintaining fresh and accurate data is critical. It includes keeping inventory data harmonized to provide clear availability and access for production and maintenance requirements.

Here again, it’s also important to establish a team approach to data collection and dissemination across all departments at all divisions in all locations, including international operations. Only then can a manufacturer have a clean accounting of supply, demand, items currently in stock and ongoing inventory needs across the entire company.

It’s a great way to cut out expensive excess capital locked up in duplicate and other unneeded stock.

Step 4: Okay, Now What?

Once the strategic review of current inventory and procurement practices is completed, procedures for managing companywide materials inventory is initiated, and a determination is made to clean up dirty data, the final step is to find the best way to do it.  

That’s where Verusen’s world-class AI platform takes over. Within a few weeks, the platform, which is empowered with algorithms and learning-capable nodes, automatically compiles, de-dupes and analyzes materials data contained within existing siloed systems, placing real-time information in a neural network that is accessible by managers across all divisions, plants and departments throughout the organization’s supply chain operations.

Taking steps to reduce excess working capital through such an interconnected AI platform can quickly halt the over-ordering of materials. Within weeks, manufacturers can collect, verify, harmonize and analyze inventory data to know exactly what they have. In addition, highly sophisticated predictive analytical technology factors in company data, real-time market conditions and ongoing customer requirements to determine with pinpoint accuracy the inventory needed to support production requirements, replacing the error-prone strategies of overstocking and over-spending.

This increased intelligence builds greater trust and control over supply/demand data for superior inventory management and procurement optimization. Further, it creates a framework for a long-term, sustainable foundation to drive savings in other capacities, delivering greater ROI byproducts and enabling new opportunities in Industry 4.0 advancements and developments.

Initiating a cost-effective, AI-driven platform to improve procurement and inventory management allows manufacturers to better work with their key suppliers and drive greater cost savings in 2020 and beyond. These savings will be continuous, triggering new opportunities for innovative investment, significant competitive advantages in agile supply chain operations and long-term benefits to the bottom line.

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