The longer inventory stays on the shelf, the more it costs you and the less it is worth. Idle inventory consumes space, labor, and capital that could be used elsewhere in your business, so optimizing inventory management is critical for profitability. While there are a number of technology and operational changes that can improve inventory management depending on your industry, below are four key steps that can help you get a handle on inventory.
- Integrate Automatic Identification and Data Collection with Your ERP Systems
To better manage your inventory you first have to know how much and where it is. Manual inventory management processes make that nearly impossible, because they can’t keep up with the speed of inventory movement. In some industries, companies rely on manual counts taken weekly, monthly, or even annually. Working on old information makes it impossible to optimize current inventory and forecast future needs.
An effective inventory management solution should include not just application software, but also barcode labels, printers, and scanners, a wireless infrastructure, and scanner-equipped mobile computers – like Honeywell’s CK3X mobile computer.
Using barcode labeling and scanning, companies can essentially keep a perpetual inventory count by scanning goods/items both in and out of inventory and across the supply chain. By connecting barcode scanning to your back end business processes by integrating the technology with an ERP system, you can get a near real-time view of inventory movement and then map that data to production and delivery information that can be used across the entire enterprise.
- Optimize Stock Levels
With accurate inventory information in hand, you can then set minimum and maximum stock levels based on actual inventory consumption. Those levels help avoid tying up capital by having too much inventory on hand, while avoiding potential shutdowns, lost sales or missed deadlines caused by out of stocks. You can also use that information to set re-ordering levels so that as inventory is scanned and consumed, orders can automatically be generated from the warehouse management or ERP system.
All putaway, picking, and replenishment processes should be system directed and utilize barcode scanning to verify each move. A durable scanner like the SR61 Rugged XR from Honeywell will help you achieve real-time, accurate stock level data to facilitate automatic replenishment and keep managers alerted to any overstocks or shortfalls, further improving inventory management.
- Categorize Inventory
With stock levels set, you can now identify what portion of your inventory is dormant, obsolete, slow moving, or in high demand using real-time inventory data. Dormant or obsolete inventories should be evaluated to determine if they could be scrapped, sold, discounted, or maintained. Plans can be developed to keep fast-moving inventory in stock. Inventory can be re-categorized over time based on seasonal swings in demand, the value of the goods, sales trends, and other factors. This should be a continuous evaluation process, so that a slowdown in demand for a particular item or part can quickly be identified and a response formulated before inventory costs rise.
Use additional attributes such as lead times, demand variability, criticality, velocity, and others to create multiple inventory management categories. This will require more complex inventory formulations, but will allow you to take a more granular approach to stocking levels and safety stock that will match the unique demand for individual items.
- Analyze Inventory Data
Use the data generated by your inventory management system to create regular reports indicating replenishment rates, inventory velocity, picking/putaway efficiency, shipping accuracy, and other key performance indicators. Then use those reports to guide performance improvement initiatives that target the elimination of slow-moving or obsolete inventory, re-slotting to accommodate shifts in demand, and eliminating any operational bottlenecks.
Barcode-based data can be used to identify stock with a low turnover ratios, as well as items that maybe prone to damage or theft.
Imprint Enterprises has helped numerous customers improve inventory management using Honeywell hand-held, fixed position, and vehicle-mount bar code scanners (like the CK71 mobile computer and the Thor CV31 vehicle-mount computer) to track goods throughout their facilities. By accurately tracking inventory with barcode labels and a robust inventory management solution, and tying that information into your back-end ERP infrastructure, you can not only streamline inventory processes but also rebalance stock levels to match demand. With the right inventory in the right location, you can simultaneously improve customer service while reducing overall inventory levels.