Your firm’s success depends significantly on effective inventory management. A cost reduction of just 5% could result in millions of dollars in savings, based on how much inventory you handle. According to the United States Department of Transportation Federal Highway Administration, the transportation network includes about 12 million trucks, locomotives, rail cars, and ships that deliver cargo. Inventory consists of materials that must be bought or put together to make a product. Inventory control can help cut costs in the following ways:
Reduce the Supplier Lead Time
You may maintain reduced costs and inventory levels by shortening supplier lead times. For acquired materials, the average lead time from suppliers is eight days. If you can reduce it by two or three days, it will significantly improve your financial situation. As you monitor your product distribution channels, consider the consequences of sticking with a slower supplier if you already work with one that is not moving as quickly as you’d want.
Get Rid of Outdated Stock
Find out what proportion of your inventory includes products that have not sold in the last 12 months. A complete accounting of your spending on these items is always eye-opening. After removing the obsolete inventory, you must stop it from restocking. To ensure that you order the proper quantities of goods, modify your demand forecasting depending on anticipated future sales. This is a relatively easy technique to cut expenses associated with inventory management.
Choose Better Software
For your company, high-quality logistics software can minimize expenses during product distribution. Find a software program that automatically updates inventory information so you can act promptly when necessary. Software for logistics also aids in centralizing inventory management, which reduces costs by removing duplication of labor. This is crucial for complicated logistics operations requiring a thorough inventory plan.
Monitor Your SKUs
SKUs, or stock-keeping units, are product identification tags that make tracking product distribution through inventories easier. Straightforward products may only have one SKU, while products that come in various shapes, sizes, and colors may have several SKUs. To decide how these products are performing in the market, you need to employ software that can organize all your SKU data in one location.
The space costs are reflected in the depreciation of your storage structures, the rent, or the part used for storage. Ensure that your supplier controls a just-in-time approach to lower these expenses and potentially free up space and resources for other uses. For more information on inventory control, contact American Western Distribution today.
