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Optimizing inventory replenishment makes your supply chain more productive and your business more profitable. The only thing worse than having thousands of dollars tied up in inventory that’s months away from turning over is not being able to fulfill customer orders.
You want to avoid both of these problems ─ and you can by taking a strategic approach to inventory replenishment.
It sounds simple, right? Just wait until your inventory is low and order more. Well, not quite.
Smart inventory management requires you to anticipate when your inventory will be low ─ in advance. This prevents you from being out of stock when a customer places an order, and it also ensures you aren’t spending unnecessary capital that could be invested elsewhere.
How to predict when inventory needs replenishing:
Both, having too much inventory or not enough inventory can negatively impact growth and, ultimately, profits. Ideally, you want to get your timing just right.
Just as you want to get your timing down for inventory replenishment, you also need to accurately predict the quantity of inventory needed. The same principle applies ─ money spent on excess inventory is money not invested in other areas of your business that could directly increase profits.
Past performance is an effective way of predicting future sales. Use historical sales data to create sales forecasts and update them regularly.
An important metric to track is the product life cycle ─ the launch, growth, maturity, and decline of a product over the course of its existence. Product life cycle management allows you to maximize the profitability of your products at each stage in the cycle.
It’s important to research, compare, and take great consideration in which businesses you will rely on for inventory replenishment. However, the vetting process isn’t over when you sign your contract or formally start your business relationship.
Unfortunately, it’s inevitable that one or more of your vendors will decline in quality over time or will be unable to match your inventory needs as your company scales. There are a variety of factors that might cause this, such as changes in management, macroeconomic conditions, innovation in technology, among many others.
Having a system in place that automatically tracks lead times and inventory forecasting is ideal for inventory management, but it also provides historical performance data for each of the trading partners in your supply chain. It’s always better to spot negative trends early and address them to prevent serious problems with inventory replenishment.
For most small businesses, one central warehouse will be enough to meet distribution demands cost-effectively. However, as your business expands, you will reach a point where multi-warehouse distribution is not only more cost-effective but is necessary to keep up with demand.
The advantages of multi-warehouse distribution:
With a multi-warehouse operation, you have the ability to replenish inventory in one warehouse with excess stock from another. It’s much easier to maintain optimal inventory levels and consistent service for your customers ─ which make your business more profitable.
EDI removes the hassles of inventory management and completely automates your inventory replenishment process.
An EDI service allows you to:
In addition to the inventory management benefits, EDI also makes you more profitable by reducing labor costs, and improving the speed and accuracy of data exchanged throughout your supply chain.
Tags : BENEFITS, Supply Chain