High inventory levels directly increase carrying costs, warehousing costs and transportation costs. If you can reduce your inventory, you can reduce its associated expenses — key to staying competitive no matter what your industry.
What if we told you there was a way to reduce your inventory expenses, without leaving your business exposed to stockouts or other crises?
In this post, we’ll explain how leveraging predictive supply chain visibility software can help you better predict the flow of inventory into and out of your operation, improving your reaction time and widening your margin of error for inventory-related crises — all while lowering operating costs.
What’s more, we’ll give you some top tips used by some of the industry’s biggest players to improve inventory visibility management through enhanced supply chain data.
Generally speaking, inventory in the supply chain falls into one of two categories: raw materials and finished goods.
The time it takes for raw materials to come into your warehouse, get processed into finished goods and be sent on their way to the customer is known as “turnover”. Ideally, you want as many inventory turnovers as possible in a given time period, so being able to identify bottlenecks in getting those goods quickly into and out of your warehouse is critical to accelerating inventory turnover and increasing inventory efficiency.
Having the right amount of inventory on hand to ensure prompt fulfillment of customer orders is crucial to any product-based business. It’s so important, in fact, that many companies shoulder huge warehouse costs to house more inventory than they need at any given time. This is known as safety stock. While safety stock ensures that companies always have enough materials on hand to meet customer demand, it comes with a huge price tag.
As new supply chain technology enables companies to adopt leaner workflows, real-time transportation visibility creates opportunities for companies to maintain lower levels of safety stock while still meeting and exceeding customer expectations.
-Fernanda Ongay, Transportation Manager, Constellation Brands
Inventory management is far from a new idea. However, a growing number of companies are using supply chain inventory visibility software to optimize traditional inventory planning processes and reduce inventory carrying costs throughout their organizations.
The risks and costs associated with each of these concepts can be minimized with the effective use of real-time inventory visibility software. For example, shrinkage can be minimized by virtue of knowing where things are in real-time, and from that being able to establish an unbroken chain of custody for the items in question. Knowing instantly where popular products are in their journeys from plant to warehouse means you can more quickly and effectively respond to changes in consumer demand and avoid lost sales and stockouts.
Finally, stock turn and sell-through rates can both be improved by virtue of the improved comfort and confidence of having a smaller inventory level to manage in the first place.
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Inventory is considered a company asset and is recorded on your company’s balance sheet. The better you can manage and track the movement of your goods, the more control you will have over your inventory. Real-time supply chain and inventory visibility is a key component of any sophisticated inventory management process.