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Sharpening Your Inventory Management Strategy, Part II

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Sharpening Your Inventory Management Strategy, Part II

Here are nine tips that electrical distributors can use to get their inventory management approaches on track right now.

 

In the first part of this article series, we showed you why all electrical distributors should make inventory management a central focus in today’s fast-paced, e-commerce-centric selling environment. Unwilling to wait more than a day or two (at most) for their orders—and in some cases, less than an hour—customers need to know that their stuff is stocked and ready to ship at a moment’s notice.

These dynamics put the wholesale distributor in an interesting position. “If a distributor can’t deliver product consistently, that customer is going to find another vendor,” says Nick Schiffelbein, CTO at LOCATE Inventory in Laguna Hills, Calif. “As cold as that sounds, it’s really just business. It’s literally sink-or-swim for the companies that can’t adapt in today’s fast-moving economy.”

To help distributors “swim” in this challenging environment, here are nine strategies for managing inventory without having to over-invest in stock and physical space:

  1. Use technology to help automate and streamline the warehouse. “There are plenty of areas where you can integrate technology into your wholesale distribution business,” Ruth Bowles writes in 5 Best Inventory Management Focuses for Wholesale Distributors. For example, she says Radio Frequency Identification (RFID) can not only help cut down on the manual labor needed to receive, scan, sort, and count inventory, but it also improves accuracy for both inbound freight and outbound orders.
  2. Work on your forecasting. “When you invest in better inventory forecasting, whether by adopting technology or new practices, you see fewer overstock and out-of-stock cases,” Bowles writes, noting that overstock situations consume valuable resources (e.g., money and space), while out-of-stock issues can harm the customer experience. “A B2B customer may take their purchasing decisions to your competition. That could spell a serious financial loss for your company.”
  3. Try using artificially-low inventory availability numbers. Schiffelbein says having a consistent feed of inventory data going out to your distributorship’s various e-commerce platforms will ensure that you don’t “stock out.” This is a good preventative measure, he says, and one that some e-commerce platforms enable by allowing companies to set “padding” numbers. These numbers let you artificially lower available inventory numbers and help companies prevent costly stockouts. This is particularly important for electrical distributors that deal with consistent stockouts on certain products. “The company that has very high product turnover,” he adds, “will definitely be at risk for that.”
  4. Make sure inventory numbers are accurate. This may sound like a no-brainer, but as anyone who has spent an afternoon driving from one Big Box store to the next in search of the right baseboards for a DIY flooring job will tell you, not all of the “available” inventory numbers you see online—or even hear from a store employee’s mouth—are accurate. To overcome this, Schiffelbein tells distributors to use inventory audits, cycle counting, and good inventory tracking (all of which can be handled by an automated system), to get good pictures of both past and current inventory statuses (i.e., How much inventory did I have in this bay in my warehouse on August 25, 2019, at four o’clock in the afternoon?).
  5. Use a database to store and track all of your inventory. Software designed to simplify maintenance management, Computerized Maintenance Management System (CMMS) solutions can also help with inventory control. “CMMS software is a great tool for distributors that need better inventory management strategies,” says Ryan Chan, CEO and founder at UpKeep Maintenance Management in Los Angeles. “And, it allows you to access your inventory data on the fly and from anywhere on your mobile device.”
  6. Establish metrics and KPIs to measure performance. Use the data that your CMMS or other inventory management system collects to calculate metrics, such as the number of inventory turns that take place within a certain period of time. “Then, further analyze your inventory data to optimize your performance,” says Chan, “and improve efficiency.”
  7. Set minimum quantity thresholds reordering milestones. By setting minimum quantity thresholds in an inventory management system, Chan says, distributors can automate the reordering process, boost productivity, and free up employees to work on more important tasks. For example, employees won’t have to spring into action every time a bin empties; the automated system will have already detected this activity and placed a replenishment order.
  8. Watch for patterns. “Study your sales patterns for the last two years and observe demand trends, including seasonality,” advises Mohammed Ali, CEO and founder at omnichannel inventory and order management platform provider Primaseller. Then, look closely at your suppliers’ shipping ETAs and plan accordingly.
  9. Only buy when stock levels hit reorder points. Ali tells distributors to calculate reorder points and restock levels for each SKU, and then stock as much as you need at any given point. “You should purchase only when stocks hit your reorder point,” he says. Using an inventory management platform, distributors can automate this process. “With that in place,” Ali says, “you breathe easy, continue to study the patterns, and then tweak your inventory levels as needed.”

 

Sharpening Your Inventory Management Strategy, Part I

Has your company’s inventory management approach kept up with the on-demand, “want it now” fulfillment and delivery environment…or not?

Read more

 

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Bridget McCrea  is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.

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