5 Inventory Management Strategies to Improve Efficiency

Stockouts can be a frustrating experience for distributors and manufacturers.

And holding excess inventory that lock in capital is equally distressing for business owners.

How can you fulfill customer orders on time and stock enough goods to meet market demand without tying up cash in excess stock?

Read on to learn how to maximize your operating margins with effective inventory management strategies and the right technology that gives you complete visibility into inventory levels, goods movement across warehouses and order-to-cash processes.

What is an inventory management system?

Overall efficiency is closely linked to managing inventory, and the best way to do that is by leveraging automated tools and smart systems to track inventory and optimize your supply chain. 

An effective inventory management system allows you to react quickly to market demands and fulfill customer orders on time while ensuring you maintain optimal stock levels. It enables you to strike a balance between being under and overstocked—both undesirable scenarios. 

It also helps you manage the flow of goods from manufacturers to warehouses and right up to the point of sale. 

An automated inventory management software or an ERP system uses real-time data to optimize stock levels against demand forecasts, release locked cash and boost profits.

Inventory Management Strategies to Improve Efficiency

Strategic inventory management is an ongoing challenge for most companies.

Consider implementing these five inventory management techniques to improve efficiency and increase revenue.

1. Use ERP software designed for inventory management

Many small companies initially use spreadsheets to manage their inventory counts. But as they grow, they often switch to a basic inventory management tool that allows them to track and monitor goods efficiently. Upgrading to an ERP solution will prove even more beneficial—allowing them to handle their supply chain and order-to-cash processes from a single system.

2. Automate your inventory management system 

Manually counting stock is inefficient. It’s time-consuming and leaves room for manual error. Inaccuracies can not only lead to revenue losses but can also result in customer dissatisfaction. And in small companies where resources are limited, that time could be used more productively in other growth-oriented activities.

An ERP system automatically updates inventory levels whenever stock is received or dispatched. So stock counts are always up-to-date, in real-time. With all relevant purchasing and sales order data in the same system, you can avoid stockouts or overstocks.

You can add other technologies to automate inventory management further:

• Barcode scanning helps you process incoming inventory faster and more accurately. It streamlines inventory management and provides real-time information about stock levels and sales.
• Radio Frequency Identification (RFID) systems that automate warehouse control are ideal for companies that handle large volumes of orders every day. RFID reduces the time and effort required for manual tracking and increases accuracy.

3. Leverage real-time data & analytics to optimize inventory management 

With access to real-time inventory data and advanced analytical capabilities, you can:

• Reduce inventory investment and release locked cash flow
• Improve customer service with accurate product availability information
• Predict the optimal inventory quantities required to meet future demand
• Limit the discounting or scrapping of old stock to improve profit margins

4. Use demand planning tools to forecast accurately 

Inventory management ERP solutions come with forecasting tools that use historical data to predict future demand. And accurate sales forecasts allow you to market your business more effectively to specific customer segments. 

For example, an ERP can help product sales teams coordinate with marketing to run advertising campaigns for in-stock products that also have high customer demand. This way, you can ensure enough stock is available to match the demand generated by the ad campaign.

5. Integrate mobile technology for real-time inventory updates 

Choose an ERP that enables users to perform daily tasks associated with receiving, putaway, picking and packing directly from a mobile device.

Mobile scanning increases overall efficiency and ensures inventory data remains accurate and up-to-date. It allows warehouse staff to scan items as they enter, move through and exit the warehouse, ensuring that there is no lag time in inventory records. This increases real-time inventory visibility.

Surprisingly, a large number of businesses still suffer from overstocking or understocking issues. Many SMEs or smaller teams still track inventory in spreadsheets or through multiple disconnected systems.

It's time to move to smarter systems and processes. 

That's why we've put together an SME guide that gives you 4 powerful ways to gain better inventory control and visibility, so you can lower handling costs and boost profits. 

Maximize your inventory management strategies with an ERP system

Efficient inventory control strategies are only a part of the puzzle. Using an inventory management system and integrating it with the rest of your organization is the key to yielding the best results.

Every industry follows specific inventory practices. 

So, what's the best strategy your business can adopt to control inventory and manage availability across the supply chain? That depends on your business's unique needs and goals, the dynamics of the industry and the existing market conditions.

For example, wholesalers look at an optimal mix of holding minimum order quantity (in stock) and avoiding the pitfalls of understock and overstock scenarios. 

Manufacturers want to keep enough materials in stock to meet demand and avoid long lead times on best-selling products. At the same time, they don't want to stock large quantities of raw materials that consume warehouse space. They look to accurately forecast demand and optimize the inventory control activities such as order planning, warehousing and transportation.

Choosing the right ERP solution for your industry's needs is key to maximizing your inventory investment and streamlining your business into a profit-making machine.

An ERP solution integrates with operations, tracks inventory status in real-time and gives your staff instant access to a live, centralized inventory database.

At ProjectLine, we help businesses find the best-fit ERP software for their needs.

For example, if you have warehouses across various locations, NetSuite's WMS module can help you streamline multi-location warehouse operations while reducing operational costs.

Some companies struggle to synchronize their inventory data, order details and financial accounting data. SAP Business One helps you manage detailed warehouse data, optimize stock locations, track and record stock movements, execute production orders and integrate these with accounting data.

ProjectLine: ERP solutions to optimize inventory management 

Did you know that only 20% of companies capture more than half the projected benefits from an ERP solution? 

To realize the full benefits of an ERP over time, you need to work with an ERP implementation partner that takes a business-centric approach that aligns your business goals and the ERP software to create valuable business benefits. 

ProjectLine is the right partner to implement NetSuite, SAP Business One and any ERP customizations or integrations for your business. Whether you're a small business or a mid-size enterprise on the cusp of ERP transformation, we have the in-house expertise for ERP implementation, training and support.

We'll recommend and implement an ERP solution that considers your goals and best fits your needs. In fact, we'll even build a customized solution if you need one!