4 inventory optimisation techniques

Fit-for-purpose inventory optimisation techniques are a must for any successful organisation. That’s why we’ve thought out 4 inventory optimisation techniques to help your business.

Getting the right combination of stock needed to fulfil demand doesn’t happen by accident. It requires careful planning, a proactive approach and a constant search for small improvements.

We’ve listed some of the key optimisation techniques that your business can take on board.


Reduce number of distribution centres

Reducing and solidifying your distribution centres is a strong start to getting your inventory fully optimised.

Having a warehouse filled with great products is one thing, but if they are stuck in an area that is difficult to access or where nobody wants it then it is a recipe for disaster.

To improve your inventory process, you can look for underperforming locations and begin to eliminate them from your distribution networks.

Ask yourself would your business still perform acceptably if you removed these distribution centres? If the answer is yes then you almost certainly don’t need them.

In most cases it is better to simplify and consolidate locations that are responsible for slow-moving or even static stock levels.


Increase frequency of production

One useful method of inventory optimisation is to order or produce fewer products at one time while increasing the frequency that you order or produce them. This can assist you in increasing the speed tat materials pass through your business cycle.

Switching things up and moving from producing large batches once a month to smaller batches once a week is a simple way to achieve this.

In doing so, your business will be more agile and more responsive to shifting demand.

Making decisions more regularly ultimately leads to greater flexibility also, as inventory levels can be tweaked often to meet fluctuating demand.

Giving yourself long lead times is only going to force you into long-term predictions that rarely work out.

Do yourself a favour and be more proactive in you production levels in order to prevent inventory build-ups.



Data analysis

Solid inventory tracking is key to ensuring the commercial customer receives their goods on time and that shelves are stocked to the optimum levels.

Your ERP software can automatically monitor levels and alert you when you are running low or when you are overstocked.

In addition, AI has now reached the required level of sophistication to analyse and predict when demand will be high or low. This can be used to inform decision making on a short or long term basis that is more responsive to change, as well as being evidence based.

Additional modules and features often have this capacity within your ERP system.


Calculate safety stock accurately

Getting the right levels of safety stock is a common conundrum in manufacturing.

First of all, it is necessary to have some insurance against unexpected uptake, surprisingly high-demand or damaged stock.

At he same time, have to much safety stock that is sitting unused, depreciating in value is a serious liability.

One way to improve accuracy is to configure systems while factoring in additional parameters.

This could include supplier lead time and supplier demand.

A major problem is when inventory managers do not know how to calculate safety stock properly, leading to significant excess stock levels.

Calculating them properly, with the right parameters, is the surest path to making small improvements that lead to significant results.

Would you like to receive further advice on inventory optimisation techniques? Get in touch with a CBO expert here.

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