Having a firm grasp on inventory management saves your company money and prevents shrinkage. One of your biggest costs as a manufacturer may be in the products you order and the goods you ship out. If you don’t have a firm grasp on both, you risk losing money.
How Can You Make Inventory More Efficient?
According to Statista, inventory distortion costs during the pandemic hit around $677 million for manufacturing. Talk to any retail store and they’ll explain how hard it’s been to get the items people buy most. Grocery store shelves still have many empty slots and there doesn’t seem to be a solution in sight.
A big part of the problem does lay with manufacturers and their lack of inventory. Of course, the problem is much deeper and goes to the root of the supply chain, but improving your inventory management system can help improve efficiency and keep your customers happy with supply versus demand.
Here are some things you can do to improve your inventory management system both in what you keep on hand to make products and the products you create and send out.
1. Set Minimum and Maximum Stock Levels
You don’t want too much of an item or too little. It’s important to set minimum and maximum stock levels. For example, if you get a surge of orders every November for a particular product, you’ll want to ensure you have enough to cover demand.
If you make something from raw materials, ensure you set levels of what to have on hand to meet the demand for the finished product.
2. Use Flexible SKUs
For most manufacturing facilities, inventory moves in and out constantly. Keeping track of what you send out and what comes back can be time consuming. Using flexible SKUs lets you keep track of your stock. Stores can use the same numbers to reorder easily or see what's selling best.
Flexible SKUs allow you to come up with a system that shows regions of sales, seasons or other vital information. You can add a number to the front or back to indicate a client, last time the item was ordered by them and many other details that help your sales and marketing teams.
3. Create a Monthly Alert
Set up reminders to take stock every month or so. Look at what amounts of supplies different departments are taking from your general store. For example, if you make widgets that use Part A, does Department 10 really need Part A? Are they taking supplies they don’t use?
You can also find waste more easily if you track materials frequently. On the product side of things, doing a quick check each month alerts you to any errors or theft before it becomes a costly problem.
4. Automate Tracking
Have you ever had an entire palette of products go missing? Perhaps $50,000 in parts disappeared and you had to reorder. You can prevent much of this problem by utilizing RFID devices on expensive machines, repair supplies and inventory.
Tag a palette of new products with an RFID tag. When you can’t locate it to sell it to your customers, you can simply track the tag and find out where it is.
5. Identify Critical Items
The items you use in the manufacturing process are just as vital to your inventory as the products you ship out. Make a list of items that are critical to operations. If you don’t have these supplies, your factory may shut down.
You should also look for items that have a long lead time to get them in stock. If you only use one part per year, but only have one item in stock, you may not get another before the machine breaks down again and you need the part. It might be best to set a minimum of two of that item in stock at all times. .
Look for Weaknesses
When problems with your inventory management system arise, jot them down and seek a long-term solution. Constantly improving your methods ensures you don’t make the same mistakes repeatedly. Over time, you’ll find you meet the needs of your facility and your customers without many hiccups.