Good inventory management has the potential to add to your company’s bottom line, boost cash flow and enhance the reputation of your manufacturing firm.
To achieve this and ultimately put your business in a strong position, you need to focus on and optimise your inventory management processes. In this article, we offer advice on how to do this.
What is inventory management?
For something so critical to business success, inventory management still has a fairly low profile. In short, it means maintaining the optimum amount, or number of, items that are critical to your business.
Manufacturers that get it right can provide uninterrupted production, sales and customer service levels, at the minimum costs.
Problems with poor inventory management processes
You can lose money through lost sales (due to goods being out of stock), preventable returns, holding too much stock, and other issues such as damage, theft, and depreciation of inventory.
On the ground, you could see this play out in myriad ways, including:
- Incorrect spending: Spending on warehousing for items that are not needed, or obsolete.
- Increasing delivery costs: You have to pay high courier fees to rush parts to your customer.
- Stalling cash flow: Your money is tied up in inventory.
- Fines: Some customers apply penalties when you’re unable to fulfil service agreements.
- Falling productivity: Your teams are focused on fixing problems, rather than adding value.
- Customer experience/reputation: Offering a poor experience to your customers – you can’t put a price on losing their trust.
Why real-time management of inventory is important
As a manufacturer, there are a number of things to be aware of on the topic of inventory management.
First is the customer tech revolution. In the age of Amazon, customers now expect to use technology to order online, specify a delivery location of their choice, track their goods, and receive items seamlessly within 24 hours.
In addition, managing inventory involves dealing with a wide range of factors that might not be within your direct control.
These include fluctuations in the prices of materials and commodities, extreme weather events, press coverage affecting demand, ‘black swan’ events such as coronavirus and Brexit – with all of their potential impacts on the import and export of goods.
In response, manufacturing is going through a digital revolution, as firms turn to new technologies that generate real-time data to help them manage multiple challenges.
These tech solutions enable you to access data and insight into all aspects of managing your inventory, including visibility of stock, orders, movement of items, interdependencies, and knock-on effects of different scenarios.
With a clear overview of the whole process, you can stop potential issues as early as possible and focus on running your business.
How to improve inventory management at your firm
1. Review, map and improve processes
Inventory management cuts across all aspects of your manufacturing operations. As a first step in a complex transformation, it makes sense to map out all of your existing processes end-to-end.
A familiar term within manufacturing is lean working. It derives from Toyota’s 1930 operating model, The Toyota Way, which streamlined automotive production.
But the principles are now used across manufacturing industries to help eliminate waste in key business areas. It is worth reviewing these to identify areas ripe for efficiencies in your inventory processes:
- Transport: Unnecessary movement of people or parts.
- Inventory: Excess raw material or finished parts.
- Waiting: People or parts waiting for the next step in the process.
- Motions: Unnecessary movement of people or parts.
- Rework: Correction or repetition of a process.
- Overproduction: Producing items sooner, or in greater quantities, than customer demand.
- Over-processing: Processing beyond standard required.
2. Get your people on side
When planning any business process change, it’s important that you communicate clearly with your people about what is happening.
Create and implement a communications plan, so you can keep your employees up to date with developments.
3. Consider new technologies
Implemented well, new technologies can help to revolutionise your business processes and stock management. There are now an array of apps and software solutions to help you:
- Manufacturing Process Management (MPR) enables you to streamline your manufacturing processes, as well as manage business operations, achieve consistent quality, and capture new sales opportunities The system allows you to identify inefficiencies in your supply chain and provide data to help inform solutions.
- ByBox, headquartered in the UK, operates Thinventory, an IT platform with mobile app, which enables businesses to see a complete picture of their inventory. The solution can trace the life of spare parts, right down to the serial number, and integrates with suppliers’ and manufacturers’ networks. The firm says it can help to reduce customers’ stock holding by up to 80%.
- For online firms, TradeGecko offers a cloud-based inventory and order management software. It combines multiple functions such as stock and inventory tracking, visibility of inventory levels across multiple warehouses, automated demand forecasting, inventory optimisation, order fulfilment, and reorder points.
4. Ask for help
Transforming inventory and business processes can be challenging, but help is on hand via a wealth of industry organisations and training bodies.
The Manufacturing Advisory Service offers a dedicated help desk and signposting service for UK manufacturers. It can support you in your bid to improve productivity, develop capabilities, enter new markets and become leaders in your field.
It can help across related areas including process improvement and access to finance.
The High Value Manufacturing Catapult offers high-growth small and medium-sized enterprises (SMEs) access to resources to optimise your business.
These include seminars and workshops to help you understand and use technologies, as well as bespoke project support to help implement improvements.
The organisation can also provide support with research into new technologies, scale-up processes and access to funding.
5. Consider using an external consultancy
In-Comm Training, based in the West Midlands, provides a wide range of support for manufacturers looking to improve processes and implement new technologies.
Sysdoc works in partnership with organisations going through major changes, often through the introduction of new digital technologies.
It has a unique approach, which involves applying the core principles of aviation (process simplification, human-centred approach and learning from mistakes) to develop simpler, smarter organisations and to enhance business performance.
Conclusion on inventory management
Inventory is an asset that’s critical to your business. If it’s managed well, your manufacturing firm will see numerous financial and reputational benefits.
At a time of significant digitisation within manufacturing, you have a real opportunity to use technology to improve your processes, work smarter, and enhance your business.