How better inventory management improves your bottom line
This blog post is about the importance of efficient inventory management for manufacturers and distributors. It discusses two costly consequences of ineffective inventory management: unassociated inventory, which leads to inaccurate stock counts and order fulfillment delays, and “boneyard” mismanagement in which obsolete items can clutter the warehouse and lead to inefficiencies in order fulfillment. By adopting the right warehouse management software, manufacturers and distributors can address these issues and improve productivity and profitability while minimizing waste.
Inventory management is a critical aspect of operations for manufacturers and distributors, as it directly impacts their ability to meet customer demands efficiently while controlling costs.
Anyone who’s ever grappled with the challenges of efficient warehouse planning knows that effective inventory management relates to more than merely ensuring the right amount of stock is on hand. It’s a tricky balancing act between supply and demand that must also incorporate consideration for storage space, handling and obsolescence, all in order to maintain profitability. In other words, there’s a lot riding on how inventory is managed.
In this blog post, we’ll explore some of the costly consequences attributed to leftover, mistakenly purchased and lost inventory, and learn how manufacturers and distributors can eliminate these unnecessary expenses.
Unassociated inventory
Tracking inventory from arrival to production or distribution isn’t always a straightforward process. In addition to materials ordered for specific jobs not being used for their intended purpose, items can be incorrectly matched to their corresponding records in the warehouse management system. This discrepancy can be the result of incorrect data entry, mislabeling or even theft.
The resulting unassociated inventory creates a multitude of issues for businesses. It leads to inaccurate stock counts, making it difficult to track product availability while also contributing to delays in order fulfillment. Discrepancies in stock levels can also result in overstocking or stockouts, which quickly translate to increased carrying costs and even potential lost sales opportunities.
The boneyard
Another well-known issue in the context of inventory and warehouse management has to do with the “boneyard.” This term typically refers to a designated area within the warehouse where obsolete, damaged or unsellable items are stored before a decision is made on whether these materials should be returned to suppliers, recycled or properly disposed.
The boneyard is meant to serve as a temporary holding space, which is crucial in maintaining a well-organized warehouse and optimizing inventory management. However, boneyards often become a final destination rather than a short layover. Failing to address obsolete or damaged items promptly can clutter the warehouse, making it challenging to manage space efficiently and potentially leading to confusion during order fulfillment.
The right warehouse management software
Boneyard items overstaying their welcome and unassociated inventory are both side effects of traditional inventory management methods that tend to hinder productivity and profitability, while tying up cash in materials that will never be used. With the right warehouse management software (WMS), distributors and manufacturers can track everything that comes into their plant or factory and ensure that it’s all being used with only minimal waste.
One of the best features of contractERP’s WMS system is that it provides perpetual inventory control on all material types, whether stock or made to order. Using a handheld mobile device, job-based component inventory can be scanned by a receiving department. In real-time, the WMS uses that scan to autogenerate barcodes and LPNs, significantly decreasing manual data entry and organizational time. The user can then assign a definition to the scanned inventory using dynamic attributes that will help identify it during pick.
In addition to the warehouse management software, contractERP can also provide a seamless flow for material associated with special orders. The contractERP Special Order process tracks the special order as it makes its way through the warehouse, from when it’s received to when it’s shipped. Not only does this minimize human error and reduce incorrect items being lost in warehouse shuffles, but by reducing the overhead time It takes to complete the transaction, direct profit is added to the bottom line.
Every item’s movement – whether it’s part of a stock or special order – can be automatically recorded and linked to its corresponding inventory record. This streamlined approach significantly reduces the occurrence of unassociated inventory and past due boneyard items, further improving the overall accuracy of stock levels and enhancing operational efficiency.
contractERP will improve cash flow
But perhaps, best of all, this level of tracking will improve a manufacturer’s cash flow. If any issue has overtaken supply chain uncertainty as the biggest headache for distributors and manufacturers, it’s the fluctuating prices attributed to inflation. At a time like this, the flexibility that improved cash flow provides is more vital than ever.
With the improved stock management that contractERP’s WMS provides, distributors and manufacturers can’t help but work effectively with their material lead times, resulting in a reduced inventory level. Not only does this release the money that’s typically tied up in inventory, but it also frees up additional floor space that can be used more profitably than an ever-growing boneyard.
To learn more about contractERP’s WMS and how it can help your specific inventory management, click here to connect with a representative and schedule a free demonstration of the software.
