The main objective of a supply chain is to have the right inventory, at the right time, at the right location with the right quantity. To achieve this objective, it’s key to have a proper inventory management process in place within the organization. There are numerous ways to achieve this without driving up the cost of operations or the cost of inventory. Most importantly, such strategies will help the organization reduce the cost associated with inventory. There are some common techniques and some unique business processes which can be implemented to achieve cost reduction and help with the better management of inventory. Many organizations should implement the following ten practices to reduce inventory costs:

1. Conduct periodic reviews and audits of various inventories being held in-house.

2. Analyze the usage and lead times of on-hand and order book inventory.

3. Reduce safety stock based on customer demand.

4. Use 80/20 rule (ABC approach) for inventory control.

5. Improve cycle counting techniques for inventory management.

6. Use vendor managed inventory or implement vendor stocking programs, which means supplier are managing inventory with the organization.

7. Use collaborative planning and replenishment (CPFR) business processes and IT standards to collaborate among multiple parties in the supply chain network.

8. Improve the forecast of each product at the item level, i.e. use a variety of demand forecasting arithmetic models. No single set of algorithms fits all customers’ forecast or product families.

9. Communicate demand/hard orders to suppliers for better delivery of inventory.

10. Implement new inventory software which uses inventory quality ratio methodology and multi-echelon inventory optimization tools.

Many inventory management teams have ideas and strategies in their minds, but no time to bring them into action. That’s why when implementing any inventory management best practice, it’s important to have upper management’s support. Additionally, any process improvement should be in-line with the corporate objectives. Regardless of what size the organization is, any of the above inventory management best practices can be used to gain extraordinary results for the organization’s bottom line.

As organizations have an overall objective to put best practices into its supply chain management, supply chain managers need to start by looking at each process within the supply chain. Each activity needs to be mapped to understand where a best practice can be implemented, and where standard cross-functional processes can be set up. Every process and activity has owners who need to be in-line with the overall best practice implementation. For every process, it is crucial to have performance measurements which will create accountability and allow users to focus on the continuous improvement of process.

The main objective of a supply chain is to have the right inventory, at the right time, at the right location with the right quantity. To achieve this objective, it’s key to have a proper inventory management process in place within the organization. There are numerous ways to achieve this without driving up the cost of operations or the cost of inventory. Most importantly, such strategies will help the organization reduce the cost associated with inventory. There are some common techniques and some unique business processes which can be implemented to achieve cost reduction and help with the better management of inventory. Many organizations should implement the following ten practices to reduce inventory costs:

1. Conduct periodic reviews and audits of various inventories being held in-house.

2. Analyze the usage and lead times of on-hand and order book inventory.

3. Reduce safety stock based on customer demand.

4. Use 80/20 rule (ABC approach) for inventory control.

5. Improve cycle counting techniques for inventory management.

6. Use vendor managed inventory or implement vendor stocking programs, which means supplier are managing inventory with the organization.

7. Use collaborative planning and replenishment (CPFR) business processes and IT standards to collaborate among multiple parties in the supply chain network.

8. Improve the forecast of each product at the item level, i.e. use a variety of demand forecasting arithmetic models. No single set of algorithms fits all customers’ forecast or product families.

9. Communicate demand/hard orders to suppliers for better delivery of inventory.

10. Implement new inventory software which uses inventory quality ratio methodology and multi-echelon inventory optimization tools.

Many inventory management teams have ideas and strategies in their minds, but no time to bring them into action. That’s why when implementing any inventory management best practice, it’s important to have upper management’s support. Additionally, any process improvement should be in-line with the corporate objectives. Regardless of what size the organization is, any of the above inventory management best practices can be used to gain extraordinary results for the organization’s bottom line.

As organizations have an overall objective to put best practices into its supply chain management, supply chain managers need to start by looking at each process within the supply chain. Each activity needs to be mapped to understand where a best practice can be implemented, and where standard cross-functional processes can be set up. Every process and activity has owners who need to be in-line with the overall best practice implementation. For every process, it is crucial to have performance measurements which will create accountability and allow users to focus on the continuous improvement of process.