Great inventory management techniques are critical as supply chain complexity grows. Here’s a look at the top techniques to help your company succeed.
Whether you’re an SMB or a large enterprise, solid inventory management techniques are critical for success.
Inventory management, a component of supply chain management (SCM), controls the flow of goods from manufacturers to warehouses to points of sale. Consequently, every inventory discussion becomes a supply chain discussion. And success for every supply chain means fulfilling demand in a competitively reliable way.
“Ultimately, supply chain planning is figuring out the combination of capacity and materials necessary to fulfill demand at the right time with the right amount in the right location,” said Paul Lord, senior research director of supply chain at Gartner. “And my use of inventory is part of how I devise the best supply plan to fulfill demand.”
To help supply chain and inventory professionals understand how best to do this, here are five inventory management techniques.
Sales, inventory and operations planning (SIOP) goes one step farther than sales and operations planning by putting an emphasis on inventory. For this reason, some experts recommend it among top inventory management techniques.
“The sales, inventory and operations planning process … drives revenue, profitability and cash flow,” said Lisa Anderson, founder and president of LMA Consulting Group Inc., based in Claremont, Calif.
An integrated business management approach, the SIOP process is meant to help organizations better align demand (sales forecasts) with supply (the ability to meet the sales forecast in the most profitable manner). Developing a supply and demand plan can help companies better understand product demand so they can lower the amount of inventory they keep, without negatively affecting service levels, Anderson said.
To work, the SIOP process brings representatives from different departments — for example, sales, marketing, operations and finance — together, who must then agree on one production plan to balance supply and demand. That boosts communication and teamwork, she said.
While SIOP is a process rather than a technology, software can help automate the process, make it easier for sales, marketing, finance and operations to collaborate, and make pertinent data more accessible.
For example, leaders can prepare sales forecasts using analytics, forecasting tools or demand planning software, Anderson said. They can also handle production planning using an ERP module or in material requirements planning software.
Published in Tech Target on Jan. 17, 2020