How to Leverage Tools and Solutions to Cut Costs and Streamline Inventory Management

Is managing your inventory a constant headache? If your inventory management practices aren’t as efficient as they could be, it’s more than just an ongoing hassle; it could be taking up a significant chunk of your operating budget. Get some relief from the weight of inventory management bloat by implementing these tactics to boost efficiency and reduce costs.

Leverage Smart Technology for Better Inventory Control

Technology is a key differentiator in many industries, and when it comes to inventory control, it’s an imperative. That means staying on top of inventory tracking techniques and investing in valuable technology tools (such as warehouse barcode labels and asset tags) and platforms (asset tracking and inventory tracking software and enterprise resource planning systems). Invest wisely in tools and systems that integrate seamlessly to facilitate rapid adoption and eliminate information silos.

Your technology serves as a foundation for effective inventory management, allowing your organization to reduce costs without sacrificing quality or impacting the supply chain.

Leverage Data for Better Forecasting

If you’re tracking your assets and inventory, you have a wealth of data at your fingertips. Analyze historical data to pinpoint trends, pick up on subtle shifts that can indicate upcoming trends, and better predict seasonal shifts that impact demand.

Precise forecasting allows you to optimize inventory by purchasing only the stock that you’ll need to get through a season or accounting period. That means you’ll have less inventory left over to get rid of after the demand has peaked, reducing the unnecessary costs of storing inventory that’s bound to sit on your shelves for months.

Eliminate Excess Inventory

Ideally, you’ll use every last item in your inventory. Optimizing inventory management will get you closer to this goal, but if you’re sitting on excess inventory that you can’t move (parts or materials that are no longer in use, products no longer in-demand, etc.), it might be time to consider unloading the excess. The best way to identify under-performing or slow-moving inventory is through an inventory audit.

While it may be tempting to hang onto those excess items in hopes that they’ll one day be needed (and thus contribute to profits), it’s often not worth it. Why? Because it costs money to store inventory, so you’re consuming resources and taking up space that could be used for profitable inventory. There are several ways to unload excess inventory:

• Offer discounts or special promotions to recoup some costs while still freeing up storage.
• Bundle by grouping slow-moving inventory with current hot sellers.
• Donate unused or non-saleable inventory to charity for a tax writeoff.

Re-negotiate Price Quantity Breaks with Suppliers

According to Rick Smith, Business Development Manager at Afflink, a supply chain logistics and GPO organization, one of the best ways to control and reduce inventory costs is to challenge minimum order quantities and find workarounds for price quantity breaks. Suppliers often use these strategies to boost their revenues and cut costs by reducing job set-ups, but it tends to result in surplus inventory for their customers.

One way to work around this, Smith says, is to propose an annual commitment agreement with suppliers, which enables the supplier to build the entire minimum order quantity (thus reducing set-ups) while agreeing to hold your inventory and ship it in smaller quantities.

Optimize Your Warehouse Layout to Reduce Stocking and Picking Time

There are many hidden costs that add to the total cost of your inventory, from acquisition and storage costs to the overhead required to maintain your warehouse, stock and pick inventory, shipping and receiving costs, and more. Optimizing your warehouse layout can reduce overhead costs by reducing picking and stocking time, thereby lowering the total cost of maintaining inventory.

To optimize your warehouse layout, you’ll want to analyze product velocity (here’s another place where your data collection and analysis tools come in handy) and measure travel time in order to organize your inventory in such a way that the fast-moving items are closest to the shipping area and storing slow-moving or seasonal items in the harder-to-reach areas.

You can also evaluate your existing layout to identify gaps and empty spaces behind or around products, which indicates an opportunity for better space utilization. Finally, consider reconfiguring shelving and racking systems by investing in smarter rack units that better utilize space, adjusting aisle widths to provide a more seamless traffic flow, and other ways you can make better use of your existing cubic footage.

Conclusion

Reducing inventory costs means a healthier bottom line, but cutting corners in order to cut costs isn’t the way to go. Doing so could mean sacrificing quality, damaging relationships with vendors and suppliers, or slowing down the supply chain, resulting in unhappy end consumers that can damage your brand reputation. Instead of cutting corners, invest in these tools and tactics and leverage your data to make smarter decisions for fully optimized inventory management.