In a recent survey, 58% of supply chain\professionals said stated inventory management is a top technical skill in their field. It is an essential part of keeping supply chains running smoothly. Effective inventory management necessitates a dependable technology platform and communication among all parties involved.
Inventory management is essential for any business to ensure that excess stock is not kept on hand while also meeting customer demand. However, a well-planned and executed list can frequently attain the ideal balance. The process of ordering, storing, and using a company’s goods or materials is referred to as inventory management. Successful inventory management enables businesses to meet customers’ demands with adequate supply.
Businesses will experience higher waste and excess storage costs if inventory management is not managed correctly. Ineffective leadership can lead to excess inventory, which risks spoilage, damage, or a shift in direction, causing the stock to pile up even more. If an inventory is not sold before these events occur, it is frequently sold at a loss or destroyed. When accurate and up-to-date information is unavailable, communicating with customers about product availability and estimated shipping dates becomes impossible.
Inventory management is at the heart of these supply chain connections, particularly product flows.
Do you know the importance of Inventory Management in Supply Chain Management?
Inventory in supply chains facilitates the balance of demand and supply, arguably the most crucial and challenging role. Companies must deal with upstream supplier exchanges, and downstream consumer needs to correctly control the supply chain’s flows. Companies must deal with upstream supplier exchanges and downstream consumer needs to handle the supply chain flows perfectly.
This places a corporation in the difficult position of balancing meeting clients’ needs, which are frequently hard to predict precisely or accurately, and maintaining an appropriate supply of materials and goods. Strategic information exchange for improved inventory management is commonly used to strike this balance.
Exchanging information across functions
Most firms use sales and operations planning (S&OP) methods to help achieve this balance. S&OP’s primary goal is to align the company’s operations, such as manufacturing, supply chain, logistics, and procurement, with its demand management activities, such as sales forecasting and marketing, to create strategic plans.
This process involves extensive modeling and discussions about the company’s on-hand, in-transit, and work-in-process inventory regularly. This procedure frequently entails lengthy debates concerning the company’s available stock, goods in transit, and products currently being worked on or assembled. By correctly understanding the inventory levels available for sale, these discussions enable the sales and marketing units to prepare for the time successfully.
The operations functions can also access up-to-date and direct sales forecasting data, which can help plan for upcoming inventory requirements. Because of the strategic choice to concentrate on some units of inventory rather than others due to a joint effort to communicate helpful information, this information should be able to change manufacturing plans or alter procurement requirements.
Exchanging information among vendors
Using point-of-sale data for inventory management in the retail sector and disseminating it to relevant parties who benefit from it would also help achieve this equilibrium. Sales information is recorded when a barcode is scanned at the register. In addition to being tracked by the merchant, upstream suppliers also give this information. Sometimes, the vendor and merchant collaborate to decide whether reordering is necessary as inventory is exhausted.
Demand information is tracked based on the lead time necessary to get the goods to the store location to determine the optimal time for replenishment orders. This makes it easier to use inventory decisions to predict when supply inflows are required to meet demand outflows. Inventory management systems are essential to complete this balancing act. Integrated inventory systems help simplify and present useful information that can be quickly shared to support critical decisions.
There are many technologies options in the market to monitor the behavior of on-hand inventory at your nodes and trading partner nodes, including raw materials, work-in-process inventory, finished goods, and in-transit inventory planned to flow in and out of nodes if you are looking for ways to improve your inventory performance.
When these technologies are combined, logistics professionals benefit from increased shipment accuracy due to the elimination of manual entry, significant time savings, and access to meaningful analytics for SKU-level cost allocation. Integrations can assist in bridging the gap between inventory management and transportation management by sharing data between systems to ensure that all parties involved have accurate, real-time inventory information.