10 Tips to Help Your Business Reduce Inventory
The ability to effectively manage inventory is essential for any small-to-mid-sized manufacturer. If inventory isn’t constantly moving through the production process, then it isn’t adding value to your business. Having raw materials or other items taking up space on your shelves ties up working capital and can lead to losses if those items expire or become damaged or obsolete.
As a manufacturer, inventory reduction and control should be one of your best practices. Here are ten tips your business can use to reduce its inventory, boost efficiency, and improve its overall results.
1. Reduce Supply Chain Lead Times
This might be a tall order if you’ve been paying attention over the past several years. The global supply chains are still a mess but continue to improve slowly. However, any reductions in supply chain lead time you can achieve will result in items being held in stock for shorter periods. You may be able to accomplish this by creating a supply chain map, which is a graphical representation of your network. This tool may give you some ideas about reducing lead times.
2. Reduce Manufacturing Lead Times
Reducing manufacturing lead times might be more achievable. The amount of time it takes to complete different stages of the manufacturing process will impact your inventory carrying costs. The faster you can produce something, the shorter time raw materials and parts will need to sit on your shelves. As you work on improving efficiency in your factory, you’ll notice your inventory costs going down simultaneously.
3. Maintain Accurate Inventory Records
It’s going to be challenging to control your inventory if you don’t know what you have. If you’re currently tracking inventory with clipboards and spreadsheets, it’s time to up your game. You can produce more accurate inventory records by leveraging a computer-based system. The system you choose should be able to cover all of your manufacturing and warehouse locations and preferably link to your different suppliers.
4. Establish Real-Time Reporting
If there is a delay in getting the information you need about your inventory and production results, this is going to impact your business decisions. The technology solutions you choose should provide real-time reporting and tracking of sales, production, purchasing, and inventory.
For example, when you integrate a solution like RFID tags with your inventory, you’ll get real-time tracking of every piece of inventory throughout the supply chain and production process.
5. Create Stronger Supplier Relationships
Gone are the days when you could have loose relationships with suppliers and expect a high level of service. Whether you want to reduce lead time, gain more visibility, or negotiate better prices, this involves an investment to create stronger relationships with suppliers. When you implement technology solutions for your business, choose ones that can integrate with your suppliers so that you can share information like production planning figures.
6. Automate Inventory Functions
Part of your inventory carrying costs is the cost of holding goods you don’t need yet and the costs of purchasing items, such as handling purchase orders and making payments. You can significantly reduce your costs by automating some of these functions. When you use a robust manufacturing resource planning solution, you can automate inventory reordering, designate your safety stock levels, and make payments automatically to suppliers.
7. Eliminated or Repurpose Obsolete Stock
If you keep stock on your shelves long enough, some of it is going to become so out of date that it’s no longer safe or isn’t being used in your production process any longer for other reasons. What can you do with obsolete stock? Your priority should be to move it out of your facility in some way. Either repurpose it or recycle and discard it.
8. Reduce Order Sizes
The obsolete stock issue should be a costly lesson you won’t want to repeat. Instead of stockpiling too many items that you may never use, consider reducing your order sizes and placing inventory orders more frequently. This can not only help keep your inventory levels lower but also manage your cash flow better.
This is another instance where you’ll want to pull out that supply chain map to choose an economical option. Obviously, you won’t want to create many small orders from an overseas supplier, but this works well with suppliers that are closer to home.
9. Switch to Versatile Components
Depending on the type of manufacturing you do, it would be beneficial to see if you could use components and materials that are interchangeable or versatile as a means of reducing or controlling inventory. Having inventory in stock that is used in a variety of different products will translate into lower costs because the materials will have a higher turnover rate.
10. Re-evaluate Your Safety Stock
Even the leanest manufacturer is going to have some excess inventory that they call their “safety stock.” While you don’t want to be too conservative, it’s important that you are carrying the right levels of certain items. You might want to schedule periodic reevaluations of this safety stock to ensure you have the optimum balance, which also takes into account seasonal shifts in demand.
Watch Your Bottom Line By Making the Right Business Choices
Controlling inventory is just one thing your business can do to improve its margins and produce better bottom-line results. Another is to choose the right type of equipment.
C&B Equipment is one of the largest industrial equipment distributors in the Kansas City area. Our specialists can help you save money by maximizing the capabilities and useful life of your existing equipment or helping you choose the best new, refurbished, or remanufactured equipment for your needs.
We offer industrial pumps, blowers, and compressors and serve clients throughout Missouri, Kansas, Oklahoma, Arkansas, and the Texas Panhandle. Contact us today for more information about our products and services!