Efficiently managing inventory with a smart inventory tool is essential for the seamless operation of any manufacturing business and plays a pivotal role in streamlining its processes. However, numerous companies still face challenges when it comes to effectively planning and controlling inventory levels.
When it comes to inventory, it’s crucial to understand that each item carries a tangible cost that diverts funds away from other areas of the business. There are also other expenses to consider, such as transportation, storage space, containers, and insurance. In the manufacturing industry, not having enough inventory can result in backorders and dissatisfied customers, while having too much inventory can significantly drive-up costs.
Manufacturers often must decide between “just-in-time” or “just-in-case” inventory management. Furthermore, manufacturers are increasingly required to support omnichannel and direct-to-customer shipments, so it’s not just about having sufficient inventory, but also about its availability and distribution.
In this article, we share the challenges faced by manufacturers and the smart inventory tools that are available.
What are the inventory challenges facing manufacturers?
Every manufacturer faces unique challenges when it comes to managing their inventory. These challenges include:
Warehouse space costs
Owning or renting warehouse space can be costly, particularly for manufacturers who need to store inventory at multiple locations.
Manufacturers must also consider transportation costs, including drivers, vehicles, and insurance, in addition to storage expenses.
Manufacturers often carry more stock than usual to meet increased seasonal demand during the summer months, resulting in additional expenses.
Without efficient inventory management software, manual counting and stock-takes are prone to errors, time-consuming, and only accurate at the time of counting.
Inaccurate demand forecasting can result in overstocking, leading to issues like obsolete or expired products, requiring discounting or liquidation to reduce losses.
Supply chain challenges
Managing the global supply chain is complex, with manufacturers constantly adapting to diverse systems, regulations, and rapidly changing market demand.
Each manufacturer must address these pain points to optimise their inventory management and overall business operations.
How can manufacturers improve inventory management processes?
Manufacturers face immense pressure to improve service levels and enhance gross margins, which can be especially challenging in industries like the food and beverage industry. Top performers in the industry are strategically focusing on three key areas:
- Enhancing or even increasing gross profit margins by effectively reducing inventory costs.
- Elevating service levels to meet and exceed customer expectations.
- Streamlining order-to-delivery times for maximum efficiency and customer satisfaction.
Inventory optimisation is crucial for businesses to balance inventory capital with service objectives. However, manual inventory management can be challenging. To overcome this, manufacturers should explore adopting smart inventory technology solutions to achieve their goals.
- Segment and differentiate inventory using filters.
- Determine appropriate stock targets for critical nodes in the supply chain.
- Measure customer service levels during the execution phase.
- Determine suitable stock targets for inventory replenishment into distribution buffers based on customer demand.
- Access end-to-end inventory data for predicting, managing, and assessing demand.
Read our Intelligent Inventory guide to find out more about each of these strategies, as these tactics together with technology solutions allow manufacturers to enhance their inventory management practices, improve service levels and achieve greater efficiency in their supply chain operations.
Smart inventory tools enable visibility across the supply chain
To successfully handle inventory, it is essential to maintain full visibility across the entire supply chain. Manufacturers need to be able to track parts, components, and products as they progress through the supply chain until they reach their final destination.
With smart inventory tools, manufacturers can easily communicate with suppliers and multi-warehouses to determine stock availability. In-transit visibility enables manufacturers to track shipments in real-time, receiving immediate alerts in case of any delays.
With the power of predictive analytics, manufacturers can analyse past sales patterns to determine the best times to adjust inventory levels based on demand fluctuations and business dynamics. This enables businesses to make well-informed decisions and allocate resources according to inventory availability. Instead of being isolated and disconnected from other operational workflows, Industry 4.0 fosters seamless collaboration across digital planning environments, providing valuable insights into digitised supply chains.
This collaboration between inventory management and transportation methods, for example, optimises warehouse stocking strategies and improves overall efficiency in the movement of goods.
Having visibility throughout the supply chain and inventory is crucial for smart inventory. Explore our comprehensive Intelligent Inventory guide to discover detailed insights on how to achieve this.