Inventory management is a necessary function of your business, but it can be both time-consuming and expensive. You can’t get rid of inventory management – otherwise, your entire operation would be thrown into chaos and you’d end up losing even more money. So what are the best strategies for reducing the time and monetary costs of inventory management while maximizing the efficiency of your business?
Choose the Right Inventory Management Software
One of the biggest ways to control costs is to choose the right inventory management software. Better inventory management software will make it much faster and easier to track and control your inventory. You may also be able to find an inventory management system that does everything you need for a lower cost than what you’re paying now, thereby saving you costs directly.
In any case, you should be shopping for a system that allows you to work as productively and efficiently as possible while saving you money in the process. These are some of the most important things to look for:
1. Niche application
What was this inventory management software intended to do? Was it designed specifically for your business or your industry? Do you have something that is intended to be general-purpose or is it a good fit for what you need it for?
2. Key features
What key features are included in this inventory management platform? Is it capable of providing a centralized and single source of truth through your organization? Does it integrate with your other software platforms to make things even more streamlined?
3. Usability
Do your employees find it easy to learn and use this software? If there’s any attrition here, it could result in major inefficiencies and therefore, monetary losses. Any confusion could result in using the system incorrectly.
4. Automation potential
Are there built-in features for automation in this inventory management software platform? We’ll dig into the automation concept later on, but it should be obvious that more automation if implemented properly, should lead to an operational cost reduction.
5. Price
How much are you paying for this inventory management software? Is there a product that does the same thing for less money?
Master the SKU System
Most inventory management systems rely on stock-keeping units (SKUs) to keep track of different types of items. Each SKU in your system will be a combination of different alphanumeric characters, usually around 8 characters long.
If used properly, each SKU will be unique, keeping track of things like the details of the product, the manufacturer of the product, the price, and other variables – all in the same place. Optimizing your SKU system can improve your inventory management in many ways, saving time and money.
Improve Employee Training
Chances are, there’s no single person in charge of everything related to your inventory management. Instead, you rely on a coordinated team of different employees with different responsibilities related to inventory management. That’s why investing in employee training is one of the best moves you can make to reduce the long-term costs of inventory management.
It’s going to cost you a bit upfront, as you invest extra hours into each employee’s education. But the downstream result is that your employees are more knowledgeable and more capable of executing your high-level plans and systems.
Reduce Supplier Lead Time
Another way to reduce the costs of inventory management is to reduce supply or lead time. Shorter lead time and quicker response time can lead to faster turnarounds and less wasted inventory space, among other benefits.
There are many strategies you can use to do this, such as automating your workflows, streamlining communication, and negotiating better deals with your supplies. Of course, if your suppliers are unwilling to cooperate, or if you have significant logistical disruptions between you, it may be time to look into replacing your suppliers.
Make Use of Automation
Finally, make efficient use of automation. Automation cuts manual labor out of the equation entirely and leads to higher efficiency, assuming it’s implemented properly.
For example:
1. Scanning
Implement automatic scanning to reduce pressure to manually scan each item.
2. Alerts and notifications
Make use of alerts and notifications so you’re aware of issues as they arise. This way, you can take action faster and resolve issues before they become too problematic.
3. Reorders
Depending on your current inventory management needs, you may even be able to set up automatic reorders, eliminating the possibility of something going wrong with a manual reorder.
These are just some of the ways that you can optimize your inventory management to lower costs. The strategies you use are going to change based on your industry and your specific needs, as well as the specific problems you’ve faced in the past related to inventory management. Keep analyzing and optimizing if you want to streamline operations even further.
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