Inventory Asset Management

Managing inventory effectively is extremely important for corporations. Carrying costs, the cost of having inventory on the shelves, must be closely monitored. In addition stock-out costs, costs associated with not having inventory when a customer is willing to purchase, must be considered carefully. Below are some tips to help your organization stay on top off inventory management.

(1)    Be cautious with promotions. Sometimes, when the marketing department is not communicating with the inventory department, a company will have an amazing sale on certain items. Within hours all of the products are sold out leaving frustrated customers and missed opportunities for profit. If the marketing team is going to focus on specific products, make sure to have a little more of those products on hand. While this may increase carrying costs a bit, it will be worth not losing customers.

(2)    Make sure everyone knows their role. If you have different departments for inventory control, merchandising, and promoting then you’ll want to make sure everybody’s roles are clearly defined. Too often inventory control or promotions believe it is their job to work with vendors when it should be the responsibility of merchandising. If roles are not clearly defined, not only will your employees be frustrated, but you might have two orders of something you didn’t want and no order for the product you needed. Worse, you won’t know who is responsible for the mess.

(3)    Track the right metrics and incentivize accordingly. The old saying goes “you get what you measure.” Your organization needs to look at inventory as a piece of the strategy. Once you have an overall company vision and goals are in place, then you will know whether it’s more important for your company to get your inventory just-in-time or if you would rather be the company known for always having everything in stock. If your company is known for always having items be in stock and that’s why your customers come, then don’t punish merchandising for above industry average carrying costs.

(4)    Reduce lead time to the extent of your company’s overall goals. This tip is related to tracking and incentivizing correctly. All inventory asset management advice seems to center around reducing lead time (the amount of time that your organization is actually holding the inventory). This is largely due to a move towards lean manufacturing. You want to be lean, but only as lean as your company’s image allows you to be.

(5)    Increase forecasting accuracy. If you are going to be as lean as your image allows you to be, then you’ll need to get better at forecasting. There is a lot of inventory management software available that can aide you in your forecasting attempts. Make sure to find a warehouse inventory management software solution that covers everything from receiving to selling. In addition make sure it integrates with your accounting department.

Inventory management is paramount for companies, especially during lean times. Remember your company’s overall vision and goals before simply diving in to solve all your inventory problems.