Pete’s Note: Today we have a guest post from Robert Lockard, who has written for shmula in the past on topics related to Inventory Management. Today is his third installment where he focuses his article on what one can expect from applying the principles of lean manufacturing to inventory management. Enjoy.
In my last two posts I answered the why’s, what’s, where’s and who’s of inventory management. Instead of doing another question-themed post, this time I’m going to talk about the positive results your business can receive by using lean inventory management.
Before going into the article, keep in mind these items:
There are at least 3 critical items that allow you to reduce costs and increase service level in warehousing:
- Tight and Necessary Warehousing Processes
- What Warehouse Metrics do you have in place to help you determine if your processes are going well or not.
- You warehouse location is optimal in the first place to meet service level commitments.
- These together will help you reduce costs in your warehouse.
1. Less Waste
The food industry makes for an easy analogy. Restaurants work with products that have a short shelf life. If you order too many tomatoes, for example, then the extra tomatoes will go bad before you can use them and the money you spent on them will be wasted. Lean inventory management, by definition, means you have very little room for error. You can’t afford to hold onto products that don’t sell well or that you simply don’t need.
2. Higher Inventory Turnover Rate
This is the game of how quickly and accurately your supply can meet demand. Returning to the restaurant analogy, demand is what the customer wants and the supply is how quickly the kitchen can deliver their food. The waiter takes the order, gives it to the chef, and the meal is prepared. The waiter is busy taking orders and the chef is busy cooking, so who makes sure there’s always enough raw ingredients to prepare the meals? Because it’s hard for those in the trenches to see the inflow and outflow needs, the best way to keep a high inventory turnover rate is to have a lean inventory management system in place.
Customers aren’t going to wait for you to have the right ingredients; they expect you to always have them. Your inventory management system needs to track past trends and monitor current inventory levels. The warehouse manager needs to see all inventory levels at a glance and make decisions accordingly. Your inventory management tool shows the pulse of your inventory.
3. Lower Costs
Ever heard the advice don’t shop for groceries on an empty stomach? In the manufacturing world this translates to don’t order what you don’t need. Stockpiling surplus goods is lazy inventory management and wastes the company’s money. A lean inventory management approach keeps reorders accurate and lowers costs by preventing inventory overstocks.
4. Faster Operations
When you dedicate yourself to making your business lean, you’ll have to turn your inventory management system into a well-oiled machine. This means just-in-time (JIT) deliveries, accurate re-orders, and precise inflow and outflow. Inventory software can do wonders for speed and accuracy. The faster the warehouse manager gets accurate data, the faster he can make smart warehouse decisions.
5. More Flexibility
How fast can your warehouse adapt to a sudden spike in product demand? A fat warehouse can’t move as swiftly as a lean one. Your warehouse needs to be flexible and adapt to changing conditions. If warehouse A needs more of a product that warehouse B has, then the warehouse manager needs to know that warehouse B can fill the need and transport the inventory in a timely manner. Your warehouse needs to be a lean and mean supply and demand machine.
About Robert Lockard
Robert Lockard works at Fishbowl, the maker of the No. 1 requested inventory management solution for QuickBooks users.
Robert Lockard is a copywriter at Fishbowl, the maker of the No. 1 requested inventory management solution for QuickBooks users.
Robert is a prolific writer, having written more than 600 blog posts, hundreds of Web pages and dozens of news articles. He studied public relations at Brigham Young University and graduated with a Bachelor’s degree in 2006.
He has written on a variety of subjects, such as real estate, online marketing, QuickBooks inventory management and film reviews. Robert lives in Orem, Utah with his wife and two children. He loves running, biking, reading and watching movies with his family.