Performance Objectives of Inventory Planning
Inventory represents one of the most significant financial assets and expenses for companies. Improved inventory planning can increase operating cash flow and generate higher profits. If you're looking for advice to improve your inventory planning, contact a supply chain management specialist. Supply chain management specialists understand the complex movement of inventory from raw materials to point of sale.
The primary objective of inventory planning is to satisfy the needs of company customers. Whether the customer is a direct consumer, a distributor or another department within the company, inventory management should provide the best-quality service. This means evaluating how many orders are shipped on schedule and how long it takes to fulfill the average order. Inventory managers should solicit customer feedback to find where fulfillment might be lacking.
A focus on forecasting not only ensures customer needs are met, it reduces the amount of inventory obsolesce. Poor forecasting means that some items will remain in the warehouse unsold. The longer the inventory sits, the higher the likelihood it will become irrelevant to the customer. Old inventory wastes space and lowers inventory turnover ratios, which many managers and inventors use to evaluate company financial health. Analyze past data, evaluate future trends and solicit customer feedback to ensure you're stocking the right products. However, keep in mind that even the most sophisticated forecasting leaves some uncertainty. Because of this, inventory managers should always retain a small buffer of excess stock.
Successful inventory planning means keeping the cost of goods sold as low as possible. Inventory managers must maintain stellar relationships with vendors in order to get the best prices for inventory. Be sure to negotiate rates and payment terms on larger-than-usual purchases. Vendors are usually more flexible with payment on large orders and won't want to risk losing a loyal customer. A large part of cost of goods sold is the direct labor, materials and overhead costs associated with any additional inventory processing. Inventory managers should work with cost accountants to identify places where costs are out of line.
Inventory storage must be top notch for operations to run smoothly. Make sure you have a current list of inventory that is constantly updated. Everything should be clearly labeled, and the label should be in clear view. This will help warehouse workers quickly identify products. It's tempting to use every square inch of space, but make sure there are clear walking paths and that workers don't have to shuffle items around to reach products.