Supply Chain Inventory

Supply chain inventory management and optimization dictates how production will operate and how storage is handled. The flow of incoming materials to receiving is fed into production and production must move it through at the rate indicated by demand.

If purchase orders are not in alignment with demand, the entire system operates inefficiently, and often, expensively. Inventory on hand, from materials to work in progress to finished goods, must all be accounted for to ensure the company is manufacturing the right amount to be profitable and fill orders.

What happens when supply chain inventory is too high?

If you have a facility that can hold a certain amount of inventory, what happens when you have too much inventory? Do the boxes or containers get stored properly or are they crunched together causing breakage? There’s a fine line between saving on additional storage costs and experiencing waste caused by poor warehouse practices.

The warehouse manager must ask whether this makes sense, or should the supply chain manager be ordering less? Ideally, the supply chain manager needs to order what demand dictates to balance the number of incoming raw materials or ingredients with products sold.

A business is trying to manage the overage, averting these problems, must take steps towards securing more storage, adding to storage costs. Inventory logistics planning for overages drives up costs; better inventory management can resolve this problem. Underordering can be quite costly, too. That is why it’s so important for a business to try to figure out the right amount of inventory to carry.

Implementing Supply Chain Inventory Optimization Management

supply chain inventoryHow will your business strike the balance between incoming materials and outgoing orders? While that precise recipe may vary from industry to industry, placing orders for material to replace items sold assumes that demand is constant. Demand can vary seasonally, according to trends and fluctuate with a change in marketing efforts. Thus, deciding how much to order and how often must take many things into consideration.

Which factors must be considered?

  1. Lead Time: The average amount of time it takes for your business to receive an order after that order is place.
  2. Reorder Point: A purchase order is often triggered when a material or ingredient reaches the minimum order quantity.
  3. Historical Sales: Past sales often help businesses predict future sales. If an item is seasonal, such as a snow blower, sales will increase during the winter months and the business can look back to see when the increase in sales began and when it ebbed.
  4. Trends: After experiencing lockdowns, we now see we must consider current events that could impact supply chain functionality and adapt accordingly, perhaps finding alternate suppliers located nearby.
  5. Profitability: If profit margins are low, taking a closer look at costs, waste, bottlenecks, etc. are helpful in uncovering where money is lost and planning on ways to rectify it.

supply chain inventory optimizationSOS Inventory can help your business manage all these variables and calculate stock levels to strike the right balance of materials on hand and demand. Whether you are managing your inventory from a single location, or have it spread across multiple locations or third-party shippers, SOS Inventory is built to handle your logistical arrangement and unify data from all your sites into a single platform that manages inventory and costs for the entire business.

Items in transit from your supply chain can be tracked, so their quantities become part of your total inventory. Often, your software cannot track this information, which is important to keeping abreast of lead times.

Integrating online and offline sales channels can be confusing and cause inaccuracies in your data unless you unify them with software the way you can seamlessly achieve it with SOS Inventory.

SOS Inventory can track inventory usual a perpetual inventory method to continually update quantities from any data access point. Users can also use a periodic method if it better fits their business model.

To reduce costs, improve supply chain inventory control, keep accurate records and scale for growth, small businesses turn to SOS Inventory for its reliable track record and impeccable customer service. Why not give it a try today for free?

Thousands of companies use SOS Inventory to manage their businesses.    Free trial