Best Practices of Inventory Management

Schedule Cycle counting

While ABC classification is the primary reference to determine the cycle counting, you can add additional criteria according to your observations, past data and other analysis. Cycle counting can be scheduled at multiple frequencies for each of the item based on the priorities of accuracy. Top priority items are counted more frequently. The schedules should also be done in such a way that the regular business is not impacted in the process. The usage of inventory counting techniques and tools like Scanners will help the cause.

As already mentioned accurate inventory is one key factor for success of Inventory Management.

Optimize the Inventory

Inventory is your support as well as cost. So you need to have just the amount that is needed to maintain your service levels. Nothing more and nothing less.

The reasons for more inventory is for multiple reasons and some of the remedies are:

  1. Inaccurate Inventory Management – issue and receiving of inventory must be accurately loaded in the system in terms of quantities as well as close to real time updates
  2. Your Manufacturing process can lead to more inventory. And biggest contributor is the setup time which is fixed time taken to arrange your machinery to perform manufacturing activities. Examples are setting up your Lathe machine before you start grinding or carving a rod. To justify the cost and time you will be forced to make more items than what you need. The Lot quantity is determined mainly by the setup time. While most ideal lot size is 1, you may try to go as close as possible to that target value
  3. Supplier lead times also give a reason for you to keep more stock levels when you know your order takes longer to receive from your supplier. While reasons like Supplier inefficiency cant be addressed, you can make the things better by giving more visibility to the supplier on your demand so supplier can plan in advance.
  4. As mentioned in the beginning, the pick and pack is one process because of which the items can leave the warehouse more quickly than it can happen in random process of dispatching.
  5. Accurate Forecasting techniques can help you avoid stocking more inventory and still meet the demand
  6. Like you increase the visibility to your supplier, you may negotiate with key customers to provide visibility of their demands so you will have more predictable demand and can plan less inventory
  7. You can use Supplier and Customer collaboration tools to have the entire Supply chain running with more visibility and transparency.

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