Inventory management can be difficult for companies trying to manage the built-in conflicts between having enough inventory to serve your customers without having excess stock. In fact, inventory management is one of the most difficult challenges for Canadian businesses. It’s not easy to balance customer needs with the correct level of inventory.
Efficient inventory control can help you achieve that balance, according to an article on the Business Development Bank of Canada’s website.
Best Practices
According to BDC, businesses should:
- Keep accurate inventory records and consider using inventory control software to track and analyze sales and inventory levels;
- Put just-in-time inventory management into practice;
- Watch consumer and industry trends to find out what hot new items are coming to the market so businesses are not left with obsolete inventory;
- Have a good relationship with backup suppliers to ensure that goods will be delivered if the main supplier is unable to deliver what is needed
The Importance of Inventory Controls
Efficient and effective inventory strategy is a critical prerequisite for success in every business, regardless of size, marketplace or supply chain, according to Jonathon Karelse of NorthFind Partners. No longer just a competitive advantage, the correct allocation of inventory resources has become a necessity in the marketplace, Jonathon Karelse adds.
Based on research conducted by BDC, establishing an effective inventory management process can help companies increase working capital, analyze sales patterns and turn inventory into cash. When properly managed, inventory control can also help businesses reduce costs and achieve economies of scale.
Push-Pull Methods
Under the push method of inventory control, products are made or ordered to meet anticipated customer demand. According to an article on Wasp Buzz, using this method requires inventory managers to have accurate sales materials, both historical and forecast. The main issue with the push method is that customers are fickle, and demand may change, sometimes quickly.
With the pull inventory model, also known as just-in-time, products are made or ordered as requested by customers.
The main advantages of the pull system is efficiency; businesses aren’t spending money ordering or storing finished products. However, the pull method is only effective when every link in the supply chain uses the same procedure.
Supply Chain Complexity
Choosing the best inventory management system for your business will depend mainly on your product offering. Just-in-time may work for some industries, but many businesses like to ensure they have enough stock at hand, in case of a supply-demand situation.
Research has shown that companies with high inventory levels also have supply chain complexity arising from artificial complexity, which is the result of inferior internal practices, such as unsuitable technology solutions, poor process design and employees with non-matching skill sets.
Higher service levels, along with reduced inventory, can be achieved by removing artificial complexity from the supply chain. Adding inventory optimization techniques to the process will help ensure maximum inventory efficiency.
