Improve Inventory Management for Manufacturing
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Inventory management for manufacturing is overseeing the ordering, storage, and use of materials, components, and finished goods efficiently.
Avoiding penalties for delays in manufacturing is one of the biggest priorities for production planners. Imagine you’re overseeing a crucial project for a significant client. Everything seems on track until you realize a critical component is missing from your inventory, and you need to stop that order. Frantic phone calls are made to suppliers to see if it is possible to get that material, but it won’t arrive for weeks. Now, not only are deadlines missed, but the company is also facing heavy penalties, reputational damage, and, worst of all, a dissatisfied customer.
Sounds familiar? If you’re in manufacturing, chances are you’ve faced this nightmare scenario more than once. Poor inventory management in manufacturing created by manual planning errors, lack of real-time data, and others can lead to costly stockouts or overstocking, which can throw even the most organized operations into chaos. Here’s the good news: this nightmare is entirely avoidable.
We’ll explore why inventory management in manufacturing is so essential in this article, the tools and strategies you can use to improve it, and how adopting the right practices can help you avoid costly mistakes and make sure your operations run like clockwork.
What is Inventory Management for Manufacturing?
Inventory management for manufacturing is the process of overseeing the ordering, storing, and use of raw materials, components, and finished products. This process includes tracking inventory levels, managing stock locations, and making sure that the right products are available when they are needed. This approach allows manufacturers to maintain balance by avoiding stockouts, overstocking, or having obsolete inventory sitting on shelves with no purpose.
As a whole, inventory management for manufacturing is about more than just keeping track of what’s on hand. It’s about understanding the entire lifecycle of materials and products, from when they enter the facility to when they leave as finished goods ready to be delivered to the customer.
Good inventory management aligns with forecasting demand, coordinating and communicating with suppliers, and ensuring production plans run smoothly and without delays. Luckily, one of the benefits of an APS system is that it helps improve inventory management and makes this process easier. This approach helps control and reduce costs, supports smoother production scheduling, and improves customer satisfaction, leading to long-term business growth.
How does Inventory Management in Manufacturing work?
- Inventory Reception: The process begins when inventory is received from suppliers. Incoming products are inspected to ensure quality and accuracy. Comparing delivered quantities with purchase orders is crucial to avoid production delays.
- Inventory Storage: After inspection, the products are stored in their designated areas. Proper organization at this stage ensures quick and easy retrieval when needed.
- Customer Order Management: When customers place orders, the person in charge tracks and assigns inventory. This involves updating stock levels and preparing the necessary items for fulfillment.
- Order Fulfillment and Shipping: The next step involves selecting, packing, and shipping the correct products to customers. Timely fulfillment helps maintain customer satisfaction, builds a good reputation, and avoids penalties for delays.
- Inventory Auditing: Regular audits ensure that physical inventory matches system records. Auditing helps prevent issues such as excess stock, inventory shortages, or misplaced items.
- Inventory Reordering: The final step involves reordering stock when levels reach a predefined threshold. This ensures materials are restocked before they run out, keeping production running smoothly without interruptions.
What are the 5 elements of inventory management?
Demand forecasting: This is all about predicting what customers will want in the future. You study looking at trends and data to calculate how much of a product people will buy so the business doesn’t end up with too much or too little.
Inventory planning: Here, it’s about figuring out exactly how much product you need to have on hand. You don’t want to run out, but you also don’t want to have too much just sitting there. You consider things like how long it takes to get more, having a little extra just in case, and how often you need to reorder.
Inventory tracking and control: This means keeping an eye on what’s in stock at all times. You track what’s coming in, what’s going out, and make sure nothing is lost or stolen. If something’s off, you fix it.
Procurement: This is basically the shopping part. You order what you need to keep the business running smoothly. You’re making sure the products get from your suppliers to you and are ready to meet customer demand.
Inventory optimization: This is about making sure you’re running efficiently. You’re looking for ways to spend less on inventory but still keep things moving quickly. Maybe you reduce the amount of stuff sitting in storage or find a way to sell things faster, either through deals or streamlining how it’s made. It’s all about saving money and boosting sales!
3 techniques used for inventory management
Push Strategy: This is when businesses stock up on products based on demand forecasts. They predict what customers will need; an easy example would be a store ordering many grills in the summer. It works well if you can predict demand accurately.
Pull Strategy: Here, businesses only order products when customers buy them, like how wedding dresses are made after the bride orders. It’s great for specialty or expensive items but not for everyday products people want fast.
Just-in-Time (JIT) Strategy: This strategy is all about being innovative and efficient. You don’t spend money or take up space on things you don’t need yet. Instead, you order or make products only when you’re ready to sell them. JIT helps save money and avoids having extra stuff sitting around. However, the downside is that you could run out of stock if your suppliers aren’t reliable, which means unhappy customers. So, it works great when everything goes smoothly, but you need everything to be on time.
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7 tips to Streamline Inventory Management
Set Minimum Stock Levels
This is one of the basic rules every manufacturer should follow since you never want to be the one telling a client, “Sorry, we’re out of that crucial part.” Set minimum stock levels for all key materials and products to avoid disasters like this. When the stock falls below this level, place an order before it’s too late. It’s like refueling your car before the light comes on—prevention is always better than panic!
Understand Your Supply Chain
You can’t manage what you don’t know. Your supply chain is like the GPS for your inventory, so map it out. Know where your raw materials come from, how long it takes to get them, and what could cause delays. Supply chain hiccups happen, but being aware of the process will help you dodge some of those unexpected bumps on the road.
Track All Product Information
Details matter. For each item in your inventory, track the SKU, supplier, country of origin, and anything else that could affect availability or price. This way, when an item becomes more expensive or more complicated to source, you can adjust your orders accordingly. Improve inventory management by knowing all the nitty-gritty details so you can act fast when things change.
Move Slow-Moving or Obsolete Inventory Out
This one’s tough, but be ruthless. If inventory isn’t moving, it’s just dead weight. Keeping it around is only causing costs and harmful use of space in your warehouse. Identify slow-moving items and clear them out. Use discounts and promotions, or bundle them with other items. Free up that shelf space and put your resources toward what’s selling.
Audit Your Inventory Regularly
Here’s a tip that separates the good from the great: audit your inventory regularly. You might think everything’s in order, but you never know what’s actually sitting on those shelves until you check. Regular audits help you spot discrepancies before they become bigger problems. Think of it like checking your bank account—catching minor issues early is better than being blindsided by a big one.
Be Consistent with Stock Receiving
When new inventory arrives, it’s tempting just to toss it on the shelves and move on. However, inconsistent receiving processes can mess up your numbers. Train your team to handle stock the same way every time. Count, inspect, and log everything properly. This small discipline can help you improve inventory management by ensuring everything is where it should be.
Use the Right Tools
Manual planning and spreadsheets may feel comfortable, but they won’t be enough in the long run. Investing in an Advanced Planning and Scheduling (APS) system or inventory management software will give you real-time data and better control over your inventory. Not surprisingly, one of the advantages of SkyPlanner APS is that it updates inventory in real-time as production orders are scheduled using its “Consider the Material” feature. Don’t settle for just keeping up—get ahead of the game!
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