Do you know how distributors manage to send goods to their customers in the most distant locations? Do you know the process that large companies adopt to keep their inventory level always under control?
When considering the strategic role of inventory management, we understand better how its impact can affect the entire operation. The adoption of control tools and investment in technology can be important allies, but it is necessary to know in detail the functioning of the performance indicators.
So, follow our content to learn more about the subject. Enjoy!
What is inventory level?
The principle to keep a warehouse stocked is the search for balance. Amounts beyond what is necessary represent an increase in costs and capital immobilization. Excessive lean levels are responsible for the unwanted effect of stockouts.
That is why this concept is so relevant, since it indicates the ideal amount of materials or products based on:
.expectation of demand fluctuation; and
.the availability of storage space.
Consider these variables to make a decision compatible with the company’s reality.
What are the main indicators for inventory management?
The term KPI (Key Performance Indicator) is used to describe the indicators considered key for the operation. This is a way of directing the team’s attention to the most relevant areas. The most used examples are:
. OTIF (On Time, In Full): it represents the percentage of orders delivered in their entirety within the required specifications. When the inventory is insufficient, there is a need to split the delivery, which increases transportation costs;
. Inventory accuracy: it corresponds to the difference between the physical inventory and the record posted in the system. For this result, the bigger the better, it reveals the accuracy of the information;
. Use of storage capacity: it refers to the rational use of warehouse space to minimize costs; and
. Return costs: it is held with the activities performed to correct orders delivered in error, such as re-delivery and reverse logistics.
How can we adopt integrated inventory management?
When we talk about the storage process, there are two challenges that affect professionals in the area: the lack of predictability about the need to supply their customers and the lack of control over the availability of the inventory itself.
In both cases, it is not possible to fulfill orders promptly, significantly affecting the level of service fulfillment (SLA). Often, the frequency of sending orders is included in the contract between customers and suppliers.
In addition, this indicator must be monitored to ensure that the goals and compliance with the requirements of each order are met.
Therefore, it is important to adopt systems capable of integrating the entire supply chain. In this way, it is possible to plan the resupply of customers, since the supplier has exact controls over the available materials.
When the process is successfully implemented, information is shared, enabling the automation of orders that can be processed quickly.
In addition, periodic monitoring of indicators prevents the customer from being harmed by the lack of materials that need to be purchased urgently. This is a clear example of how maintaining inventory levels can affect the organization as a whole, as well as its relationship with customers.
If you are looking for efficient solutions, check out three essential tools for inventory control.
ABOUT THE BLOG
The VMI Portal is a portal of news and information on systems of collaboration between suppliers and customers, which is growing continuously. The idea is to promote and disseminate the concepts of Supply Chain Management (SCM) and Vendor Managed Inventory (VMI), among other topics.