6 Ways You Can Improve Your Inventory Management


As all manufacturers know, maintenance of inventory levels at your business is vital to the success of a supply chain. Though balancing supply and demand is tough work, it is detrimental for your firm to have either too much or too little product or material. It is universally acknowledged that inventory management is crucial to the operation of any manufacturing company.

An excess of inventory often has negative financial implications for a company, with the assumption that the business will have to absorb the costs to hold onto leftover materials, rather than reap the benefits if they were active on the market. Low levels of inventory equates lost sales, which could even extend into the marketing and branding of a given company. This is due to the fact that the firm cannot be relied on for timeliness or stock. Supply is not guaranteed, and the company’s reputation could be tarnished.  

Failing to correctly manage manufacturing inventory can cause harm to a business. Here are 6 ways you can improve your inventory management:

1.Utilize real-time analytics.

With so many forms of technology available to manufacturers in this day and age, it would put you at a disadvantage not to make use of them. Real-time analytics refers to software and applications that measure the data of your supply chain in real time, meaning that they effectively record changes to inventory as they occur.

This is beneficial to a manufacturing company because it increases precision. Real-time software provides a timelined record of the different types of inventory a company is holding onto during a given day, week or even business quarter.

This data can then be audited by analysts to consider where productive periods lie in a company’s business cycle, or what may or may not be working in terms of supply levels. Data in real-time is the most effective way to look at trends in inventory levels.

2. Do not group inventory for analysis purposes.

One mistake commonly made in inventory management is the attempt to “group” different types of inventory together, thinking that it will simplify the process of moving the inventory along. The truth is, different products need to be treated differently.

Categorizing materials can be beneficial for organizational purposes, but it is important to remember that there are a number of factors that can be the basis for how an item is classified, and all factors should be considered. This is so that one factor is not perceived as more significant than another.

Examples of the ways in which inventory can be categorized include stage in the product life cycle, stage of production, quantity on hand or direct materials it is comprised of.

3. Invest in relations with suppliers, retailers and middlemen.

Often, the key to an effective supply chain is ensuring that materials can move smoothly through production and distribution. Prioritizing relationships with external businesses that make up different parts of your company supply chain is an effective way to do this. These components of the supply chain may affect inventory management in terms of the timeliness in which a material is delivered or picked up from the plant.

One way to improve this is to encourage communication from the account managers who remain in contact with suppliers, retailers and other middlemen. Not only should these managers be frequently communicating with these other parties, but they should also be frequently reporting updates back to the plant so that floor managers and inventory analysts can respond accordingly.

Though relations with these parties revolve around the tangible items that these interactions produce, spending a little more time communicating with people from different parts of the supply chain is a surefire way to improve inventory management capabilities.

4. Prevent surpluses and stock outs.

This tip is easier said than done, since the complete balance of supply and demand within a company is a very fine art to master. However, there are some precautionary measures that can be taken to ensure that your company avoids having too much or too little inventory on the regular.

Some manufacturers use the term “par level” to refer to the bare minimum level of inventory that must be kept on hand. The par level of inventory at different points of the production cycle can be determined by examining the data of past inventory for trends and computing an average that is reflective of a low quantity for expected demand.

Materials must keep moving through the production process to avoid a buildup of excess material. A rule of thumb that many manufacturers think about to keep production running smoothly is “first in, first out” (FIFO). This means that the earlier a material was received by the plant, the sooner it should be developed into an end product and ready to be distributed for sale.

5. Encourage employees to practice time management skills.

One of the reasons that inventory management can be so difficult to master is because a large portion of it relies on timing. Time is a difficult thing to be certain of, especially when “time” by this definition is a blanket statement that refers to the timing of multiple different parties, processes and machines. Humans cannot control time, but we can plan ahead to hopefully avoid errors in production and performance.

Encouraging manufacturers to consider their own time management skills can certainly offer positive effects to the inventory management of your business. An employee who uses his or her time effectively can only be an asset to how successful inventory is managed at any company.

Examples of ways to promote time management within your manufacturing workforce include standardizing floor operations, scheduling specific break times and incentivizing the pay system. For a closer look at time management tips that every manufacturer can benefit from, check out this blog post.

6. Audit yourself.

A good way to increase the likelihood of catching an issue in inventory management before it fully presents itself in the supply chain is to constantly review the inventory levels at different areas of production. In other words, check, re-check and then check again. If these duties do not fall under any current employees’ job descriptions, consider investing in your business and hiring people to audit your inventory management.

Spot checking is as it sounds; randomly selecting a type of inventory, checking its quantity, and then comparing your number to the ideal number. By doing so, you will also begin to generate statistics on how often your company inventory levels deviate from the expected levels.

If possible, and therefore depending on the quantity of a given product, another method of auditing in inventory management is to supplement software systems by physically counting the amount of a certain material on hand or being completed.


What are some other ways a manufacturing company can improve its inventory management? Tweet us @AppleRubber