Ordering enough inventory to meet customer demand has always been a tricky process. During slow seasons, you have to worry about product waste and operational costs. On the flip side, not having enough stock during busy periods could lead to backorders and frustrated customers.
Types of Inventory Control Methods
Balancing inventory levels depends on the type of control system that is adopted: push inventory or pull inventory. Push inventory management involves ordering products based on forecasted customer demand. The estimates typically concentrate on 6-month periods but could extend to 12 or 18 months in advance. Based on that prediction, you purchase enough products to meet the demand. With pull inventory, you:
- Have enough inventory to meets spikes in demand
- Order larger batches of materials less frequently
- Push the products you have in stock during that selling window
Some issues with this system are the high inventory carrying costs and potentially inaccurate forecasts. If a prediction is wrong, you could end up facing the same issues of too much or too little stock to meet demands.
Pull inventory management works as a type of lean manufacturing method that many companies use today. With this technique, products are manufactured only when there are customer orders. Smaller inventory orders are placed more frequently as the goods spend less time sitting on warehouse shelves.
A major disadvantage to push inventory is that busy sales periods can strain your supply chain, leading to frequent stock deficits. To overcome this shortfall, some companies will combine push inventory with pull inventory, making bulk purchases of certain materials to act as an inventory buffer. These extra products can be used when there are spikes in demand that tax pull inventory controls.
Accuracy Is Paramount for Balanced Control
Even with efficient techniques to procure inventory, an inaccurate product count can cause these methods to fail. You may lose product when it is not placed on the correct shelves or in the right zones. This could lead to false data in your records, creating issues further along the supply chain.
Even manually evaluating inventory accuracy could still lead to issues. Item numbers may not be entered correctly in warehouse computer systems if products are placed in the wrong inventory categories. This can cause inventory numbers to fluctuate or show that there are no products available. Not to mention that manual data entry wastes the staff’s time when there are sales orders that need to be picked.
With new warehouse innovations entering the market, many companies are turning to management software and automated systems to balance their inventory. These solutions allow for more accurate processes, such as automated data entry. With this tool, sales representatives will have a better idea of which products to promote to customers, while warehouse staff will know where products are located and in what quantities.
Building a balanced inventory scale is critical in order to meet customer demand and streamline warehouse operations. Evaluating your processes, adopting the right inventory planning model, and implementing the proper tools should allow you to successfully stock and deliver products for happy customers.
Author bio: Beau Christian is Director of Marketing at WSI, a leading third-party logistics provider that specializes in fulfillment, chemical warehousing, transloading, transportation and more. Having the 17th-largest 3PL network in the United States, spanning more than 15 million square feet, WSI delivers tailored end-to-end supply chain solutions to customers who seek to increase efficiency, shorten lead times, deliver more reliable performance and minimize costs.
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