3 Inventory Management Techniques You May Not Have Considered

Inventory management
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In a nutshell, MRO inventory management is the delicate balance between having enough stock to remain well equipped without overspending on inventory items that may remain unused.  

Incorporating effective inventory management methods and procurement management strategies can keep MRO inventory counts in the sweet spot, reduce human error, minimize expenses, and maximize profitability. 

In this article, let’s look at three inventory management techniques that can help you manage your MRO inventory efficiently.

Elevating inventory management

Digital supply network optimization 

In times of crisis, a thorough understanding of your MRO procurement process is necessary to avoid production downtime while minimizing overspending. Knowing the answer to these questions is the first step:

  • Where is stock held, and in what quantities?
  • Which inventory items are most commonly used and why?
  • What stock items are kept in excess to avoid issues with shipping delays and backorders?

Knowing the answer to these questions lays the groundwork for optimization. Odds are if you use disparate, outdated, legacy systems to manage inventory, the data you’re reporting is fragmented, inaccurate, and siloed across sites.

Using consistent data collection methodologies and consolidating supply chain data into a single location is the best way to eliminate such inventory redundancies or shortages and achieve true visibility. 

Aggregating data from multiple locations, departments, and sub-units not only optimizes inventory sharing across the entire organization but stakeholders will also enjoy the luxury of having access to real-time, accurate materials  data. 

Consignment and asset disposition

Consignment refers to a business model where a supplier (consigner) places their stock in the hands of a manufacturer (consignee) while retaining ownership of it. 

Since the manufacturer only pays for the goods as they’re used, they don’t have to tie up capital to inventory. This is excellent for critical components because with this method you have immediate access to replacement parts and don’t have to wait for downtime to occur to order them. The saved money can also be reinvested back into other strategic areas of the business – that also drive operational improvement.

Furthermore, since you have adequate inventory at your disposal, you can decrease lag times associated with restocking and save on expedited processing and freight costs. What’s more, this model can help you combat a dynamic market with demand uncertainty. Instead of overestimating demand and overstocking you will have sufficient stock that’s just enough to meet maintenance needs. 

If you’ve never utilized this option and find yourself with overages of certain materials, you can seize the opportunity by selling excess parts to other manufacturers. This not only helps you recoup some of your procurement spend, but it’s also an excellent way to remove duplicates from your own inventory while simultaneously boosting sustainability impacts. 

Inventory Categorization Analysis 

Categorizing your inventory can reveal hidden gems ripe for optimization. 

This type of analysis helps identify products that have a fast turnover and generate the highest replenishment needs. This sheds light on items that you should reorder more often and which items you don’t need to stock as frequently. 

Optimize your categorization process by ensuring that products are properly categorized and labeled, especially if suppliers use alternate names or labels for certain products. Having too many naming discrepancies  spread across sites doesn’t help maintain flexibility in inventory sharing, so embrace tools with natural language processing that are designed to quickly identify parts regardless of supplier part number wherever you can.  

Bolster whichever strategy you choose with the power of AI 

Keep inventory visible across sites

As an enterprise, it is common for you to have many sister facilities generating giga-tons of supply chain data making it easy for inventory information to be buried underneath. Not only does this severely strip away the visibility of your company’s data, but the sheer volume of it also makes it difficult to be interpreted on a human level.

Investing in an AI-based cloud solution will help you gain a 360 view of your inventory instead of a partial view of just a subset of it. You will harmonize data from your entire supply network and consolidate it into a single platform for quick analysis. 

Machine learning algorithms are equipped with the power to analyze large data sets with a high degree of accuracy that otherwise wouldn’t be possible with human efforts. With the increased transparency of data, businesses can easily identify pain points and make corrective actions to fine-tune performance. 

This way, there won’t be any delays or disruption to supply chain processes when production downtimes occur. 

Eliminate the guesswork from optimization 

Predictive analysis can take your inventory management to new heights. Instead of relying on estimated guesswork, leveraging Industry 4.0 tools can help your business adopt a proactive approach to procurement rather than a reactive one. 

In a dynamic global market, consumer demand and customer preferences are always changing and it can be hard to predict them accurately, making needs regarding critical materials that much harder to manage. 

Predictive analysis is intelligent enough to use historical data and current market trends to yield actionable insight to managers. This information can then be used to make informed business decisions.  

Optimize inventory management with cutting-edge tools 

Indirect materials management can be difficult, especially because it can involve so many moving parts. Supply chain disruptions and shipping delays add to this uncertainty. But it shouldn’t be as complicated as some of us make it.

By carefully managing your MRO inventory, your procurement team can stay ahead of problems and continue to support healthy profit margins.  

The right materials management software can do the heavy lifting for you. To learn more about optimizing your procurement and materials management strategy with a materials management intelligence platform, download the ebook on overcoming MRO challenges today.

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