Is your stock optimally aligned with the real needs of the market? Can you reduce inventory without endangering production? Does a just-in-time approach offer the solution? How much you have to keep in inventory depends on the extent to which supply and demand are in balance. The more aligned inventory is with the market’s demand, the smaller the inventory has to be. It generally holds that the greater amount of inventory, the longer it takes before it yields cash. Reduce the cycle times.
Do you have a good view on what sells quickly and what slowly? Do you adapt your inventory strategy accordingly? A good inventory management system keeps you accurately informed and enables you to respond appropriately.
A logical logistical choice is to round off numbers for orders upwards to assure full boxes, full pallets, and full freights. That is a valuable reasoning. However, the result is that there is more in stock than strictly necessary. Regularly weigh the cost price of this ‘logistical efficiency arguments’ against the cost price of the inventory.
Uncertainties in production and logistical knowledge lead to a build-up of security inventories. Often nodal points in the chain are the cause. You can avoid this with better calculation models, better communication flows, more reliable business processes…
How accurately can you forecast future demand? When capacity can´t keep up with peak periods in demand, it makes sense to build up a strategic anticipation stock. At the same time, study how you can smooth out the fluctuations in demand, the peaks and the valleys.
Do you expect increases in raw material prices? Investing in a speculative inventory can be a smart decision. When weighing the pros and cons, consider all elements to arrive at a comprehensive cost-benefit analysis.
Are the warehouses sheltering old stocks that might no longer be marketable? Cut the needless logistical storage expense and eliminate aged inventory.
Products in stock guarantee fast delivery, which is good for the customer relationship. Nevertheless, for certain product categories, it´s worthwhile to evaluate whether this level of service really outweighs the expense.