Inventory management plays an important role in Supply Chain Management. Most companies invest a huge amount of its revenue for managing inventory. The challenges of managing inventory is increasing day by day. This inventory management affects the production planning frequencies. Especially SMEs’ are facing a lot of problem to manage optimum inventory level.
In today’s market competitions has increased drastically and it’s not only between companies, but also between their supply chain management system in how a company can handle the challenges of reducing lead times and costs, while increasing customer service level and inventory management.
Inventory management and optimization are top priorities of manufacturers. The best way to do inventory optimization is to keep minimum inventory while fulfilling the customer needs. The ultimate success of any business is often dependent on its ability to provide customers with the right goods, at the right time, at right place. Excess inventory requires a lot of capital and shortage of inventory means unsatisfied customers. A balance must be maintained.
Here the role of inventory management & optimization becomes very important, particularly in sales and procurement. Satisfied customer can only be maintained by appropriate levels of stock.
The aim of inventory optimization is to reduce the holding and maintenance costs, without neglecting the customer satisfaction level. In other words, inventory optimization helps to reduce inventory while improving service level.
Inventory optimization can be achieved by implementing some key components:
- Better Forecasting & Planning: Forecasting & Planning is the key parameter to reduce the excess inventory. It should be based on sound market research to optimize the customer demand.
- Accurate Logistics: To maintain optimal inventory in this competitive world. Companies should practice Just in Time (JIT) process.
- Optimize production: Production process need to improve to reduce waste time, effort & material. Company should check their production processes, capacity to better optimization of production.
- Identify and reduce variance: This is also an important parameter for improved inventory optimization. Company should find & control the variance for increasing the performance & savings with better product quality.
- Create strategy for better service level planning: Company should put in action some strategy to increase customer service level without compromising the quality.