Nothing is more frustrating to a customer than placing an order only to find out after the fact that it’s out of stock. Your company may lose nearly half of intended purchases when customers encounter stockouts, according to the Harvard Business Review. Those abandoned purchases translate into losses of about 4% of overall sales for a typical seller and it could be more for etailers or B2B wholesalers.
Inventory management is more than knowing how much of something you have on the shelf; it is the tracking and organizing of goods from supplier, through the manufacturing process and into customers’ hands.
Inadequate inventory management directly affects the customer experience. Without a real-time understanding of inventory on-hand, and its status, businesses are unable to effectively plan and execute on customer orders.
Improving the Service-Inventory Tradeoff
In the research paper “The Right Stuff: Managing Inventory to Enable Agility for Manufacturing and Distribution Companies”, one of the strategies in inventory management is to improve Service vs Inventory Tradeoff – i.e. to increase service levels without adding inventory or lower inventory levels without lowering service levels, or improve both simultaneously. There are 6 areas to work on :
• Accurate SKU-location inventory data—The foundation is having accurate SKU level inventory data for each location. This provides the underlying raw data needed for better forecasts, optimization, and process improvements.
• Improved forecast accuracy—When forecast accuracy is improved, the amount of safety stock can be reduced without sacrificing service levels.
• More accurate lead times—Inaccurate lead times are a perennial problem. Replenishment decisions and algorithms depend on the lead time being accurate. The most reliable way to improve lead time accuracy is with a system that monitors actual lead times and reports when they deviate too much from the lead time recorded in the system that is used for replenishment decisions/optimization. Such an approach can also capture lead-time variability, which is also needed for proper replenishment decisions.
• Shorter lead times—Inventory levels can be reduced by shortening lead times and by reducing lead time variability. Companies may choose to source locally to reduce the transportation portion of lead times. They can work with their strategic vendors on reducing production lead times, as well as improve their own internal processes to reduce internal lead times (such as in-house production cycle times and fulfilment lead times) and make lead times more reliable and consistent (less variability in lead times).
• Kanban/Just-in-Time—Just-in-Time lean techniques, such as Kanban replenishment, can be used to reduce the amount of inventory needed. Modern Kanban typically uses barcode scanning and EDI (the latter for sending external replenishment orders).
• Inventory optimization—As a firm’s operations become larger and more sophisticated, it may use inventory optimization algorithms to create more optimal levels of inventory across its network, while maintaining or improving service levels.
Watch how Wobbleworks adopt the turnkey demand-planning solution for their eCommerce-centric business’ for their growth.
Managing Inventory Data Automatically in ONE single source
Automating manual processes associated with managing inventory and having the insight to better forecast and utilize inventory improves inventory management across these four areas:
If you stock, sell and fulfil items in more than one location, it is essential to have visibility into stock levels across all locations to optimize inventory usage and get products to customers in the quickest and most profitable way. With NetSuite Inventory Management, stores can be set up as a location, providing a true enterprise-wide view of inventory. With visibility into inventory across all locations, you can proactively monitor stock levels and sell through, transferring inventory between locations as necessary to ensure inventory availability and minimize obsolete inventory. Sales associates are empowered to save the sale in stockout situations with access to enterprise-wide inventory availability, enabling them to transfer, hold or ship items directly to the customer.
Wholesalers or distributors can also minimize the amount of inventory required to be on hand by executing a cross-channel fulfilment strategy, easily fulfilling online orders from store. With NetSuite, multi-location inventory management also allows you to analyze and understand seasonal and location specific trends.
Customer satisfaction and profitability require maintaining the right amount of inventory to fulfil anticipated orders while keeping excess stock to a minimum. Manufacturers and distributors must account for fluctuations in demand, seasonality, supply chain logistics and a product’s natural lifecycle to ensure sufficient stock on hand. NetSuite inventory management provides demand-based replenishment by using historical and seasonal-based sales, average lead time and number of days’ supply to stock data to dynamically manage item reorder points and maintain preferred stock levels. It generates tasks, alerts automatically and sends the tasks to the purchase manager for execution.
- Cycle Counting
Integrating regular cycle counting as an ongoing periodic task reduces required safety stock, lowers overhead costs, makes physical counts less painful and is an important anti-theft tactic. NetSuite inventory management allows you to categorize inventory based on the volume of transactions and/or value. You can then schedule regular periodic counts of on-hand item quantities and auto-assign count tasks to floor staff to help maintain inventory accuracy. By implementing periodic cycle counts for select SKUs instead of performing a full cycle count, the count can be integrated into everyday tasks, minimizing the disruption of warehouse operations. If items are stored in multiple locations, using bins in the warehouse greatly eases the counting process and accuracy as you know exactly which bins to go to perform the counts, instead of walking around looking for the items.
Companies need the ability to trace products through their entire lifecycle. By using lot and serial tracing, businesses are able to both backward trace (linking finished goods to raw materials and suppliers) and forward trace (linking finished goods to purchase order and customer records). Lot numbers give you the ability to track the quantity of items and the specific cost for each group of products based on when they were produced. On the lot number record, you can identify an expiration date and enter notes about the lot. Serial tracking lets you choose a specific serial numbered item to fulfil or receive an order. Together, lot and serial numbers allow you to define fulfil3eement strategies (such as FEFO – first expiring, first out) to minimize waste and ensure inventory is used in the most efficient way. Bin management and defining your merchandise hierarchy also help with traceability. Using matrix items enables you to track items by options such as size and color. An item matrix consists of a parent item and subitems. Updates made to the parent item can be automatically applied to the subitems – greatly simplifying SKU management. With an item matrix, each subitem is tracked separately.
Learn more about how to pick the right inventory management system for your business.
On-boarding NetSuite Inventory Management on the CLOUD ERP in 100 days.
No matter you are a million-SKU manufacturer-wholesaler, or have recently expanded your traditional wholesaling business to online stores, NetSuite inventory management system is flexible and scalable for the complexity of your SKU and transaction volume surges. As part of the Cloud ERP platform, all inventory data forms an integral part of the single source of truth, enabling real-time visibility of the profitability of your whole business.
At ONE Pacific, we will accompany you to assess the priority of your inventory and end-to-end demand planning strategy. See our Rapid Result Approach:
Blogpost adopted from : https://www.netsuite.com/blog/4-ways-an-inventory-management-system-drives-profitability