The Not So Secret Strategy behind Efficient Inventory Management


Most companies have some kind of inventory management system. If this system is effective or not is a whole other question.

If you’ve worked in any type of manufacturing, retail, or distribution type industry, you know that one of the big challenges is Inventory Optimization. An inventory doesn’t only include physical products and materials. In service and knowledge-based types of industries, inventories include “work in progress” or WIP. Whatever your inventory management system, the ability to pivot and react quickly to fast-changing business conditions can be the competitive edge your company needs to drive profit.

Companies that have embraced new technologies have a better ability to deal with disruptions and use their greater agility to meet changing customer demands.

How is Inventory Currently Being Managed

In the more recent past, many companies used Excel spreadsheets or limited software to manage their inventories. The cost of doing so is illustrated by the example of Cisco, who in 2005 wrote off 2.2 billion dollars in inventory. The company attributed this mistake to improper tracking of duplicate orders and overestimation of future demand.

Currently, more data-driven supply chain management is becoming standard. Many companies are funneling data from multiple systems and both internal and external sources to provide more accurate forecasts and be able to predict consumer trends faster.

Supply Chain Disruption Issues

This type of disruption can strike at the heart of any business, causing issues to either production or distribution.

Supply Chain Disruptions can cause:

  • Financial loss
  • Logistical issues and 
  • Damage to Reputation

For example, when there is a supply chain disruption affecting a commercial aerospace company, it can cause up to a 90% decline in earnings. Most inventory issues may not cause this level of loss, but the number serves to illustrate the importance of good inventory optimization and management.

How to Deal with Supply Chain Disruptions

A frequently used catchword to describe the quality needed to thrive in today’s work environment is “resilience”. This quality is also one that businesses need to apply when dealing with service and supply chain disruptions.  

Any good manager will tell you that they begin planning for succession and contingencies from day one of their employment. The same should be true of supply chains. Good planning and preparation go a long way to avoiding and handling supply chain disruptions.

To build long-term resilience into any supply chain system, new technology needs to be adopted. By leveraging advances in inventory optimization systems, including machine learning, AI, and data-driven models, inventory planning becomes more:

  • Flexible
  • Responsive and
  • Effective.

As the old saying goes, an ounce of prevention is worth a pound of cure. By consistently reviewing and updating to newer and more powerful technologies, a company can be better prepared to deal with any scenarios that may occur.

What Benefits come from Adopting New Inventory Technologies 

Companies that embrace new technologies have a greater ability to deal with disruptions and use can use this greater agility to meet changing customer demands. This in turn can lead to less waste, greater efficiencies, and more profit.

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