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,
- 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.