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