What is Inventory optimisation
Inventory optimisation is the act of keeping the right amount of inventory on hand to fulfil demand, keep logistical costs low, and minimise stock-outs, overstocking, and backorders.
Three Tips To Help You Start Optimising Your Inventory
Implementing an inventory optimisation solution is about understanding what inventory you need to ensure you meet customer demand and decrease working capital so that you deliver on time, every time.
Identify and clean out obsolete stocks
Identifying all the stock that haven't sold or sold very little in the last six months. This stock or items are no longer relevant to your business or stock records. They do nothing but take up room and cost you money.
Establish supply chain KPI’s
You can't improve unless you track your progress therefore, implementing shared KPIs across the organisation is critical to improving inventory management.
Check out our article on Supply Chain KPIs
Improve sales and purchasing forecasts
It's hard to make precise sales forecast however, investing time on your forecasts from the beginning will save you time and money in the long run.
Top 5 Benefits of Inventory Optimisation
- Eliminate supply chain variability
Procurement, production expenses, and service requirements are all more visible.
- Increase your customer service levels
With the added benefit of demand alignment and forecasting, you'll reduce stock-outs, improve delivery, and satisfy more customers more frequently.
- Reduce your working capital
Optimising your inventory allows you to reduce working capital (by reducing unnecessary inventory buffers) and improve your service level. It guarantees that you get your consumers what they want, when they want it, without having to keep a lot of inventory on hand.
- A better-informed, more efficient workforce
Your employees will feel secure in the knowledge that they are selling the correct products at the right margins. Improved information transparency reduces lead times and costs while also reducing unnecessary storage and processing.
- Inventory planning
Instead of storing extra products, you can automatically develop time-phased inventory strategies to minimise inventory levels and increase turnaround times. For example, set the best safety stocks and replenishment quantities by individual item and optimise allocations by location.
Challenges of inventory optimisation
It is important for business to understand the common challenges in inventory management so they can implement strategies and appropriate technology to help overcome them. Here are our top 5 challenges to look out for:
|1. Inconsistent tracking
Manual inventory tracking across many applications and spreadsheets is time-consuming, redundant, and prone to errors. A centralised inventory monitoring system with accounting features might be beneficial to small enterprises as well.
|2. Changing demand
Customer demand is always changing therefore, having too much inventory could result in obsolete inventory that you can't sell, while keeping too little inventory could prevent you from fulfilling customer requests. Ordering tactics for essential items as well as technologies for creating and executing an inventory strategy can all help manage fluctuating demand.
|3. Supply Chain Complexity
Global supply chains shift daily, placing a burden on your inventory planning and management operations. The manufacturers and wholesale distributors that dictate when, where and how your inventory ships require flexibility and offer unpredictable lead times.
|4. Insufficient Order Management
Preventing the overselling of products and running out of inventory is a common challenge in inventory optimisation. Using historical and seasonal data trends can help you accurately predict customer orders.
|5. Inadequate Software
To scale inventory management software to support complex logistics, it needs to integrate with your existing business process platforms. The difficult task is choosing from hundreds of inventory management solutions and mastering a host of features that require training and ongoing support.
We can help
We use data-driven technology to identify the correct inventory levels to help your business thrive. Our software uses your existing data to run thousands of simulations that our analysts review to find the ideal stock levels for your business. The simulations consider data and challenges in relation to current stock levels, distribution, suppliers, in-transit materials, and seasonality demand.
Inventory optimisation software allows you to keep track of where your stock is in your entire network and how much stock you have on hand at any given time. This is hugely beneficial to your business as it saves you time and money, while delivering a seamless customer experience.
If you would like to disucss how Titan can support you, please use the link below.