7 Moves to More Efficient Inventory Management in Distribution

April 13, 2021
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After the disruption caused by the COVID-19 pandemic, distributors are looking for ways to improve efficiency. They’re considering solutions that simplify and automate labor-intensive processes, shrink excess costs, and reduce risks to keep them competitive.

One area where such efforts can have the greatest impact is inventory management. Significant advancements have been made in software and technology to improve this process, yet many distributors hesitate to adopt new solutions due to the perceived cost and complexity.

Manual inventory processes and low visibility inhibit distributor performance overall, expose them to risk and limit their ability to meet demanding customer expectations. And inefficient management leads to wasted inventory, time and spending.

If you’re one of the many distributors evaluating your inventory management strategy right now, here are seven high-impact moves that will make your entire process more efficient. Most of these actions are interconnected, with one improvement setting the stage for the next. However, your inventory management upgrade doesn’t have to be all in one. You can take measures in phases according to your budget, prioritizing those that will have the most immediate and profitable results.

1. Centralize With Software
For most of the following efforts to be effective, you need a centralized system for pulling in data, managing inventory, connecting devices and technologies, and marrying information from across departments. A cloud Enterprise Resource Planning (ERP) system with integrated warehouse management is ideal.

Disparate systems limit your ability to optimize inventory based on demand, identify stocking and process inefficiencies, respond quickly to demand fluctuations and supply issues, and make accurate forecasts.

If unifying and integrating your systems for greater efficiency sounds complicated and expensive, don’t let that be a barrier. Once you start investigating your options, you’ll find it’s more customizable, affordable and approachable than it seems. With a cloud ERP:

  • You don’t have to migrate all of your systems and processes at once.
  • You can choose a monthly subscription option to avoid a larger upfront cost.
  • The returns and efficiency improvements are often substantial enough to warrant the cost.
  • You’re empowered to expand your capabilities as you see fit, and cloud options are incredibly scalable.

2. Update How You Count
A great place to start is with your tracking methods. Today, technology that simplifies inventory counting and tracking is more accessible and affordable than ever. These technologies enable greater visibility into real-time stocking levels and centralize the process so you can see everything at once. You’ll be able to know faster and more accurately what you actually have on-hand. With these methods, you’ll be able to locate products in your warehouse more efficiently. And real-time accuracy, along with a centralized ERP system, will help prevent overselling goods that are out of stock.

A few examples of technologies and devices that improve the tracking process include:

  • Internet of Things (IoT) weight sensors
  • RFID
  • Barcode scanners

These technologies also give you better visibility over your supply chain and make for more efficient data collection as they are scanned, implemented and tracked across their journey. You’ll know readily what you have on hand and avoid wasting time and money being understocked or overstocked. And you can pinpoint delays and bottlenecks after a product leaves your warehouse.

3. “Mobilize” Your Workforce—And Your Customers
Put information right in your employees’ hands when they need it by giving them mobile inventory management solutions that are integrated with your ERP system and tracking technologies. Your employees can see and manage inventory in real time using phones and tablets. Phones can even act as barcode scanners.

Additionally, with it being more difficult to manage customer inventory remotely, you can provide mobile options to customers for real-time data on their stock. They can use it to manage inventory at the point of use, giving you better visibility into their usage so you can optimize inventory for replenishment.

4. Focus on Improved Forecasts
Forecasting is vital to more profitable inventory management. If you can better predict and respond to demand in real time, you can more closely optimize what you stock. You can get closer to the mark in stocking items you’ll need and reducing items that won’t move quickly enough as demand fluctuates.

The primary focus for distributors’ is the cost to maintain and store inventory, particularly for products that need special storage conditions, have expiration dates and are damage prone. ERP systems and improved tracking methods, with technologies like IoT and RFID, enable distributors to pull accurate and consistent inventory data, map it to sales data, and generate forecasts they can use to optimize inventory.

5. Use Data to Identify Inventory Inefficiencies
Data can also help you gain insight into your current inventory and processes so you can catch and remedy inefficiencies. You might:

  • Find you’re constantly over- or under-stocking specific items.
  • Discover an opportunity to buy a fast-moving item in bulk to capture a discount.
  • Determine whether following certain demand trends is historically unprofitable for your business.

Skin Script worked with Eide Bailly to improve their inventory management process and saw an immediate savings of over $25,000 in annual cost.

6. Assess Your Suppliers
Your relationships with your suppliers can greatly influence inventory management. Suppliers who deliver late and provide inaccurate supply impact your ability to maintain planned inventory and delivery to customers. One-off instances are usually acceptable, but regular occurrences are worth noting and responding to. This is essential to more efficient inventory management.

Use your data to assess suppliers, determining which are high performers and which are not. And assess your own interactions with and purchases from them. You might be purchasing in ways that aren’t profitable, like bulk orders that save money in the short-term but contain difficult-to-move inventory.

If a supplier your customers prefer is affecting your efficiency, you don’t necessarily want to lose that relationship. Consider how you might adjust terms and improve your relationship with them instead.

7. Optimize Your Warehouse
You can create incredible efficiencies by improving the layout of your warehouse and the way inventory is moved. With the wealth of data pouring into your ERP, you can see if:

  • Your most frequently picked items are farthest in your warehouse or require more effort to get to.
  • There’s an opportunity to group items frequently purchased together to minimize travel on popular orders or for specific tasks your customers frequently tackle.
  • You can streamline routes and processes for employees that otherwise take more time than necessary.

These improvements can be applied in every aspect of warehousing, from receiving to shipping.

Adopting these technologies and streamlining your processes is well worth the time and effort for the quick returns. However, not every solution is the right fit for every distributor, and you may want to approach implementation in phases.

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