Inventory management can be one of the toughest areas for custom manufacturers to get right. With so many jobs, people, parts and pieces to keep track of, it’s no wonder that manufacturers get bogged down and in trouble with their inventory.
A great inventory management system is key to keeping on top of your inventory, but I’m going to tell you a little secret: Inventory management is all about good habits. Even the best systems can’t keep track of your inventory if your practices and habits are all over the place (remember the saying garbage in, garbage out?).
To effectively manage your inventory you need to adopt a set of best practices for your shop, and consistently follow through with them. If you have a set up where it’s all open shelving, and anyone can grab a part at anytime to do a job, it may seem like a good idea because it lets your staff be flexible and have access to what they need to get a job completed. But it will leave your inventory counts in tatters and you will never know what you have on hand, and what you need to order—meaning there is a good chance you will come up short on a key part when you are trying to get a job done and out the door.
Changing habits, like in all walks of life is hard, but if you buckle down, give it some thought and a lot of hard work, you can put put in place some best practices. Your staff (and your customers) will thank you because you will have a more organized shop, fewer last minute surprises and delays, a smoother running shop—and get more orders out the door.
Incorporate these top 4 good habits into your inventory management practices and reap the rewards!
1. Pick a method to manage your inventory—and stick with it
There are many ways to manage inventory, such as the push inventory model, the Just-in-Time (JIT) model, or hybrid models that combine principles from both. It doesn’t matter which system you use, just pick the system that works best for your business—and then stick to it. Sounds simple enough, but if you don’t stick to one way of counting and controlling your inventory you can get into heaps of trouble—and never have the right amount of inventory on your shelf.
Most manufacturers can benefit from an inventory management system within an ERP that is linked to the rest of your processes and departments and that has barcoding built into it, meaning workers can scan inventory and let you know in real-time what parts are being used. This way you will always know what you have on hand, and don’t have to wait for a job to be completed to know your counts. But the choice is yours. Choose a system that works best for you, and be consistent with it, and you will always have a good handle on your inventory.
The right inventory management system will help you order the correct amount of parts, at the correct time. Whether it’s a system that re-orders parts when levels dip too low, or is based on ordering parts at a set time period, being consistent with your inventory management will make purchasing easier (which we all know is another problem area for many manufacturers).
2. Keep a tidy shop
This should go without saying but tidier is always better. Having a dedicated place to store your inventory, no matter the size of your shop, is always the best practice. And then you need to keep this area tidy!
Having a tidy spot for your inventory will increase your productivity, as it will always be easy for your workers to locate the part they need, instead of wasting time sifting through various parts. It will also help you keep a better eye on your inventory as you will better be able to see what parts you have on hand, and what parts are getting low. You will also be able to easily verify your inventory counts with what’s in your system. And you can also say goodbye to misplacing a box of parts, only to find it shoved in a corner—after you have re-purchased the missing parts.
Keeping a tidy shop is a very simple step to better inventory management, but it does take a little bit of effort. Inevitably storage systems will go askew and parts will be placed on the wrong spot. But if you dedicate a couple of hours every month to tidy wherever you keep your inventory, you will easily be able to keep on top of it, making your shop run much smoother.
3. Keep the correct level of stock on hand
Again, like habit number 1, this will be unique to your manufacturing business, as the correct inventory level for you will primarily depend on the type and size of your business. For example, the number and types of items kept on hand will differ drastically between a job shop and a custom heavy equipment manufacturer. A good rule of thumb though is to keep low stock levels to lower your operational costs.
Although keeping surplus inventory on hand may seem like a good idea, as it means that you will always have the needed parts on hand to complete a job, in reality it is a habit that is costing you money. The money you have tied up in excess inventory can almost always be better used somewhere else, for example to grow your business, than to keep your inventory shelves over-flowing.
Using an ERP to manage your inventory will help you know what inventory levels will be the best for your business. An ERP will monitor your inventory levels in real-time, letting you know what you have on hand, and what needs to be re-ordered, making it easy to keep the correct level of stock on hand. By now you should know that using programs like Excel just don’t cut it—they don’t support multiple users, can’t keep track of real-time data and are slow and inaccurate.
4. Use analytics to guide your inventory decisions
Information is more valuable than any best guess, and it will help you with forecasting and decision making when it comes to your inventory. Analytics from an ERP system can really help you untangle a story which once seemed complicated. Make a habit of reviewing the built-in reports your ERP system offers. Not only will you have access to real-time data and get up-to-date information on things like daily stock updates, low stock triggers, unpredictable boosts in sales of a certain product, an ERP system, and the robust data it collects will also give you insights into things like seasonality, sales patterns, and past turnover—letting you make better decisions about stock levels.
Managing inventory supply is also about accurate forecasting. Failing to forecast, or forecasting using an unreliable method, can put you at risk of having too much or too little stock on hand. A good habit is to always keep on top of industry trends, as you will see these trickle down to your business. Coupled with keeping on top of your own analytics, you will have a good understanding of your industry and business, and will be able to make the right decisions about your inventory.
Looking for more information? Check out these ways how ERP can improve inventory managementundefined Or book a free demo to have a look at the built in features and functionalities that manufacturers need to manage their inventory levels.
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