Whether you’re a small startup or a well-established enterprise, having an inventory management policy in place is crucial for streamlining your operations, reducing costs, and maximising profitability.
Unleashed inventory management software has many features and capabilities to aid businesses in upholding an effective inventory management policy. It can help you to take control of your stock and achieve your business goals.
The Basics of Inventory Management
Before diving into the specifics of creating a policy, it’s essential to understand the basics of inventory management. Inventory management is the process of overseeing the ordering, storing, and using of a company’s goods or materials.
An efficient system ensures that you have the right amount of stock on hand at the right time while minimising carrying costs and the risk of overstocking or stockouts.
Implementing an inventory management policy
To implement an effective inventory management policy there are several key considerations that you should address. By doing so, you’ll not only streamline your inventory processes but also enhance your overall operational resilience, setting the stage for sustained growth and competitiveness in your industry.
- Assessing your Current Inventory Situation: To develop an effective inventory management policy, you need to start by assessing your current inventory situation.
Unleashed provides a range of tools and reports that can help you gather crucial data, such as current stock levels, turnover rates, and lead times. Understanding your current inventory performance is the first step in identifying areas for improvement.
- Set Clear Objectives and KPIs: The next step is to establish clear objectives for your inventory management policy. What are your specific goals? Do you want to reduce carrying costs, improve order accuracy, minimise stockouts, or optimise your order quantities? Once your objectives are defined, set key performance indicators (KPIs) to measure your progress.
Unleashed’s reporting and analytics capabilities can help you track and monitor your KPIs effectively.
- Inventory classification. Segment your inventory into units, value, and into fast, medium and slow moving. Categorising your inventory is crucial for effective management. By classifying your items, you can make informed decisions regarding reorder points, order frequencies, and safety stock levels. You need to also categorise your stock by type: raw materials, work in process, finished goods, MRO inventory (supplies, spare parts and other materials needed for routine maintenance, repair and operations).
Unleashed’s inventory categorisation feature allows you to group products by various attributes, such as demand, value or seasonality.
- Safety stock levels: Review demand variability between forecasts and actual sales. Accurate inventory forecasting is the cornerstone of effective inventory management.
Unleashed offers forecasting tools that use historical data, demand patterns, and seasonality to predict future inventory needs. By leveraging these forecasts, you can make informed decisions about reorder points and order quantities, reducing the risk of overstocking and stockouts.
- Inventory Reduction Strategies: Consider direct to store deliveries when possible to avoid a warehouse receiving process. This not only streamlines the supply chain but also reduces handling and processing times. It’s a practical strategy to enhance efficiency and cut down on unnecessary steps in the inventory flow.
You must consider the number of stocking points you have, and what locations across your supply chain hold stock in units and value. Understanding where stock is held across the supply chain helps in optimising inventory levels. This strategic assessment ensures that stock is distributed efficiently, preventing overstocking or stock outs at specific locations.
You must understand the extent and nature of stock write offs to isolate damaged inventory and improve stock provisions. By isolating damaged inventory and improving stock provisions, you can minimise losses and maintain accurate inventory valuations. This is a proactive step toward financial efficiency and waste reduction.
Through real-time visibility, demand forecasting, multi-location management, reporting and analytics, and integration with sales channels, Unleashed enables businesses to implement proactive inventory reduction strategies.
- Supplier Relationship Management: Building strong relationships with your suppliers is essential for maintaining a smooth inventory management process. You should review the order size and frequency for each vendor. Significant contributions to inventory reduction can be achieved by controlling order quantity requirements with vendors. This is crucial for optimising stock levels and avoiding both overstock and stockouts.
Additionally, lead times from vendors to stocking points need to be considered. Understanding the time it takes for products to move from suppliers to stocking points is critical for maintaining efficient inventory levels and meeting customer demands.
Be sure to discuss your service level agreement with your vendors by order and SKU. This ensures clarity on expectations and responsibilities for both parties.
Unleashed helps you track supplier performance, lead times, and order history, enabling you to identify reliable suppliers and negotiate favourable terms. A robust supplier management strategy can lead to better pricing, faster deliveries, and consistent product quality.
- Replenishment quantity and frequency: the impact of inventory movement between stocking points and the cost of transport. Your inventory management policy should include detailed procedures and guidelines for various aspects of inventory control, such as order processing, receiving, and picking.
Unleashed allows you to set up automation rules and alerts to enforce these policies, ensuring that your inventory is managed consistently and efficiently.
- Regular Audits and Revisions: The business environment is dynamic, and so is your inventory management policy. Regular audits and revisions are essential to ensure that your policy remains aligned with your business goals and adapts to changing market conditions.
Unleashed’s reporting and analytics tools make it easy to evaluate your policy’s effectiveness and make necessary adjustments.
Creating an effective inventory management policy is a critical step towards achieving operational efficiency and increasing your bottom line. With Unleashed inventory management software at your side, you can streamline your processes, reduce costs, and make data-driven decisions that will set your business on a path to success.
If you are eager to find out more about Unleashed inventory management software and how it can aid your business in managing your stock, please don’t hesitate to get in touch – [email protected].