Strategies for Right-Sizing and Maximizing Inventory Efficiency



A company's inventory is often their largest balance sheet asset, so its importance cannot be overstated. One need only to look at super-companies like Amazon to understand how effective it can be to plan and strategize with laser focus on inventory processes in order to reduce costs, meet customer demands and succeed in today's competitive market.


A small list of inventory challenges for companies include having critical products readily available while still identifying those products which might easily have substitutions, effectively identifying slow moving products and removing their drain on the system, and constructing accurate demand forecasting models. In this post, we cover some key considerations that companies need to focus on when developing a strategy to maximize inventory efficiency in order to reap the benefits of right-size inventory levels.


1. Build a strong team


Developing a capable team of inventory management analysts is one of the most important investments companies can make. An effective team can provide a comprehensive inventory plan. Not developing a strong team because managing inventory is "simple clerical work" underestimates the task at hand.


2. Leverage technology


Don't try to skimp on systems support. A good warehouse management system is responsive to all the requirements of managing inventory including exceptions reporting, monitoring, tracking and forecasting. Often, due to the size of the company and its inventory, an investment in a warehouse management system can be unnecesary and thus it might be better to look into implementing software systems that can provide inventory management functionalities aside from their main purpose.


[ Related: Supply Chain Integration As A Competitive Advantage ]


3. Design a strategy & KPI's


Creating a solid strategy that oversees all the processes and using key performance indicators to monitor inventory performance will help to gain visibility and stay ahead of challenges.


Consider your entire supply chain, rather than simply focusing on inventory warehouses. The supply chain entail a series of steps that are equally important, and paying attention to all of them will ensure efficiency. Some significal considerations could be the following:


  • Analyze whether a drop ship vendor could be part of an effective strategy for your organization.


  • Know where your sales are coming from and whether or not each avenue is achieving their targeted goals.


  • Have an overstock strategy that will address the issue of what to do with slow moving stock, rather than allowing it languish on shelves or in storerooms.


  • Evaluate how to achieve the highest fill rate for each individual order, especially when it requires shipping from multiple distribution centers.


Be thorough in your analysis. Review the entire process of managing inventory, in addition to planning and forecasting, in order to reduce inefficiencies throughout. Those companies who understand the importance of a beginning-to-end strategy will maximize their ability to remain profitable.



#inventorymanagement #warehousemanagement

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