Inventory Reduction Strategies
Every type of business will eventually encounter storage issues in their warehouse. Warehouse storage should be efficient and flexible to adjust to customer demands, but without streamlining procurement and reducing inventory, you could face a significant decrease in productivity.
Cost containment and inventory reduction strategies should be used as indicators as companies move into their next fiscal year. Inventory reduction planning will ultimately free up working capital and prevent over-stocked items from becoming obsolete.
Five Best Inventory Reduction Strategies
These five inventory reduction strategies can be leveraged by distribution companies to keep costs under control and the warehouse free of storage issues:
- Reduce your supplier’s lead-time
Negotiating faster supplier lead-times can be one way to keep inventory levels and costs down. It may also be smart to identify ad-hoc suppliers with a quicker replenishment model. Faster lead-times allow inventory managers more flexibility when reordering and reduces the risk of holding on to obsolete items.
- Eliminate any obsolete inventory
Different from a full on inventory clearing, obsolete inventory pertains to items that are in stock but are not currently in demand. They are typically labeled as obsolete when they’ve not been sold in 12 consecutive months. Monitoring the life cycles of every unique product and track changes in demand over time will help eliminating obsolete inventory.
- Centralize inventory management
Inventory control solutions enable supply chain managers to better predict inventory levels. Centralizing supply chain models also allow for smarter planning and procurement execution and prevents the accumulation of excess inventory.
- Update forecasts regularly to optimize purchasing
An ideal way to keep costs under control is to update forecasts regularly. Purchasing departments can then achieve their goals and meet customer demand without the burden of extra inventory. Smaller, more frequent orders help increase flexibility for when order variations occur or demand patterns shift.
- Continuous inventory reduction strategies analysis
There are many ways to effectively reduce inventory, but regular analysis seems to have the most effect on the bottom line. Take the time to better manage inventory levels by completing efficiency assessments on inventory management and reduce purchases if needed.
For further assistance with inventory reduction strategies and to take advantage of cost savings in your warehouse, contact 3pl providers like AECI. We will help you find working capital for re-investment in other key business areas and maintain smooth cash flow. We can also help sell any obsolete or unused inventory to help you increase usable storage space. Contact us today for more information on our services.