Tips for Effective Inventory Management

Evaluate your Inventory Management System
  • Does your manufacturing business have an effective inventory management system?
  • Inventory impacts nearly every aspect of your business, yet still many manufacturers don’t put enough emphasis on area.
  • An Inventory Management System controls the flow of materials into, through, and out of a manufacturing company.
  • Think about whether your company really has an inventory management system that includes procedures for purchasing, producing, organizing, monitoring, and shipping your inventory.
Consider the Financial Impact
  • Costs that can fall under the umbrella of inventory management include Purchasing, Inventory Cost, Warehousing, Manufacturing, and Distribution.
  • Such costs might represent as much as 70% of the operating budget!!!
  • Inventory Management, by virtue of its huge collective budget, provides a major opportunity for a company to improve its profitability.
  • Yet this area still often receives less focus than marketing, finance, and general management.
Document Policies and Procedures
  • Do you have documented policies and procedures in place in all key areas?
    • Policies describe what you want to do.
    • Procedures provide the details of how you will accomplish these policies.
  • Are your procedures properly designed to be both efficient and effective?
  • Do you assess your adherence to your documented policies and the results of performing required procedures?
Develop a Written Plan for Inventory Management
  • Should be a detailed plan that covers all aspects of inventory management.
  • Must assign responsibilities to those performing and overseeing each critical function.
  • The detailed plan should be a byproduct of the company’s strategic plan.
  • Measurable goals should be established and reporting should include comparison to these goals.
Monitor Goals and Results
  • Manufacturers are better at setting goals in other areas like sales.
  • Should have formal goals to be achieved in your inventory management process, including metrics for:
    • Purchasing costs,
    • Production efficiency,
    • Quality,
    • Inventory Turnover, and
    • Waste and Obsolescence.

For more detailed information on Effective Inventory Management, please view a full presentation from Dannible & McKee’s 2016 Manufacturing Conference.