We are breaking down our 'Inventory Management for Manufacturing' guide into digestible sections. You can get the full inventory management guide here.
Let’s start with the reasons that manufacturers should invest in more efficient inventory management.
Six main benefits come from modernizing inventory management practices
1. Profit Maximization
Efficient inventory management leads to reduced holding costs and a reduction in losses that stem from obsolescence, spoilage, and dead stock. Lean processes also minimize stock outages, which has the knock-on effect of increasing sales and building repeat customers.
2. Waste Reduction
Not only does efficient inventory management cut down on dead stock, but it also reduces the movement of stock that eats employee time and machinery usage. Because processes are more efficient, inventory is only moved when a customer orders it.
3. Product Quality Improvement
Quality, along with profit maximization, are two of the top goals that every manufacturer faces. Efficient inventory management, specifically lean inventory principles, focuses on identifying product defects via inventory management, which also helps cut down on return costs and creates a greater customer experience at the same time.
4. Reduced Lead Times
Efficient inventory management cuts the time between manufacturing a product and when it is shipped to a customer. This shorter lead time creates customer satisfaction and enables manufacturers to adapt more quickly to changes in demand.
5. Rapid Stock Turnover
More efficient inventory management ensures increased stock turnover, which frees up warehouse space and reduces both carrying costs and spoilage.
6. Sustainable Business Practices
With sustainability and environmental concerns an increasingly important business concern, efficient inventory management helps manufacturers reduce their ecological footprint through areas such as reduced energy use and the elimination of paper resources such as pick tickets, packing slips, and paper forms in the warehouse.
Read the next section, Why inventories are often not efficient >
