Maintaining adequate inventory levels is not an easy discipline and depends on a number of factors, including the industry the company operates in. Manual records and spreadsheet planning are often no longer sufficient. Therefore, more sophisticated tools are increasingly being used to improve inventory management, streamline warehouse processes, and reduce the risk of errors.
How and where does inventory optimization begin? The best way is for a company to set a goal in this regard. " The goal of companies is usually to have enough goods in the warehouse to cover demand, but at the same time avoid excess inventory that takes up space and ties up capital. The main thing is to have an overview of what you have in the warehouse, how quickly the goods are selling and which items you need to replenish, " notes Jaroslav Šufajzl, sales consultant at GRiT.
The approach of companies has changed significantly recently. " For the last few years before Covid, the just-in-time approach to inventory was constantly in favor. Then Covid came, the blocked Suez Canal, the rise in oil prices and other influences that shook the supply chain, and companies began to look for a different way to approach inventory, " describes Petra Tylová, Director of Logistics and Distribution at Sluno. According to her, the basic thing that companies need to realize is the reason why they actually want to hold inventory. Is it inventory of materials for production, final products for sale, or goods for distribution? What is the risk to the company if it does not have inventory? Will it jeopardize production, or for example, will it not have anything to sell? On the contrary, what is the risk if inventory remains? Are these products with an expiration date that can only be thrown away? Are these expensive goods that will be unnecessarily stored in the warehouse? And an important question is whether the warehouse can handle holding such inventory in its current space. " There is no single rule that can be followed. Optimization means something different for every business and it always needs to be handled by someone who can evaluate the entire chain and all possible consequences, " says Petra Tylová.
How often and in what quantity?
A frequently discussed topic is whether it is worthwhile for companies to purchase goods more often in smaller quantities, or less often in larger quantities. “ This depends on many variables that change over time. The cost of human labor, the cost of transportation, the cost of storage and the company’s cash flow play a role in particular, ” calculates Ondřej Klement, chief delivery officer at Logio. It is also necessary to take into account the market situation, which applies in particular to commodities that may be in limited quantities or whose purchase price fluctuates significantly. The above decision depends on the type of business and storage options. “ For companies that work with fast-moving goods or goods with a short shelf life, such as food, it is better to purchase more often in smaller quantities. This will avoid the risk that the goods in your warehouse will become obsolete or will not be sold, ” emphasizes Jaroslav Šufajzl. On the other hand, companies that trade in goods with a longer shelf life, such as tools or electronics, usually prefer less frequent and larger purchases. This approach helps save on transportation while ensuring that the company has sufficient inventory to cover stable demand.
The continuation of the article can be found in the latest issue of the Logistics Systems magazine on page 60.
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