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The Goldilocks Equation: Does Your Supply Chain Have Control Of Your Inventory?

For leaders, particularly CFOs, inventory isn't just a collection of items on shelves—it represents a significant financial commitment. This tied-up capital could otherwise generate interest or necessitate borrowing at interest rates. Additionally, it restricts the funds available for other business investments. Consequently, minimizing waste in inventory and purchasing is a top priority.

However, inventory is also essential for sales; no stock, no sales. This introduces the need for what we call the Goldilocks Equation: How do you determine the right amount of inventory that is enough to meet sales demands without incurring unnecessary costs? This strategic balance is crucial for business success, making inventory management a key responsibility for leaders within the supply chain.

Strategic Inventory Control: Balancing Act for Business Success

Effective inventory management requires meticulous planning and control. Here are steps to achieve this balance:

  1. Waypost Goldilocks Blog ImageDefine the Optimal Inventory Range: Determine the necessary inventory levels per SKU based on business needs, which can adapt over time.
  2. Conduct Inventory Analysis: Compare the optimal inventory range with the current stock levels. Identify if overstocking or understocking patterns are temporary or long-term, using this insight to optimize inventory.
  3. Monitor and Manage: Establish ongoing processes for inventory review, management, and decision-making.
  4. Develop an Inventory Scorecard: Track and display inventory performance against set targets.

Starting Points for Implementing Inventory Control

If your company hasn't yet implemented these strategies, it's important to begin by identifying who is accountable for inventory management. This includes ensuring efficient inventory turnover, adherence to processes, and timely deliveries. By defining responsibilities and roles within your supply chain, you can take the first step toward effective inventory management. This will help streamline processes, reduce waste, and optimize inventory levels to meet customer demands while minimizing costs.

Waypost Checklist previewIf you want to improve your inventory management, our comprehensive checklist will help you achieve inventory success with strategic action steps that guide you through establishing clear responsibilities, empowering a dedicated supply chain planning function, and aligning with leadership to ensure your inventory management aligns with your business goals.

Get your copy of the Inventory Management Checklist now. 



A Cautionary Note on Assigning Inventory Responsibility

Assigning inventory management to the finance department is common but not always advisable. Inventory reflects a range of upstream and downstream activities, and those within finance might not have sufficient insight into operations to effectively manage it. Ideally, this role should belong to someone within the supply chain or operations who manages inventory since they have a better understanding of the nuances of inventory decisions.

The Real-World Impact of Improved Inventory Management

Our experience with various companies shows that improved inventory management leads to visible and quickly realizable benefits. By optimizing this aspect of your operations, you can significantly boost your supply chain efficiency and business profitability, making a real difference to your bottom line.

Related Read: What is Waiting to Improve Your Inventory Management Costing You?

Achieve Supply Chain Success with Waypost Advisors

At Waypost Advisors, we work with companies everyday that benefit from improved inventory planning and management processes. Our industry-experienced consultants specialize in providing expert guidance and support to businesses looking to optimize their inventory planning and management processes. Our comprehensive approach leverages cutting-edge technologies and industry best practices to help companies achieve measurable and sustainable results. By partnering with us, clients can streamline their operations, reduce costs, and enhance customer satisfaction. Contact our team today and let Waypost Advisors help you achieve your goals.

Waypost Advisors is an end-to-end supply chain and resourcing solution. We offer expertise in procurement, inventory, project management, planning, transportation & warehousing to fit the needs of your B2B manufacturing or distribution company. Our advisors can provide you with the resources and expertise to tackle your supply chain challenges while allowing you to still focus on running your business.