What Is Inventory Management? Posted on May 29, 2014October 1, 2020 by Bruce Penas Inventory management is an integral part of the success of your business. It’s all about making sure you have the right amount of the right materials in the right places at the right time. It seems easier said than done. At any given time, you need to know what’s on your shelves and how much, and what you need to order and how much. And ordering isn’t merely replacing; it’s a business decision based on demand and trends. In addition to these issues, you have to keep in mind the cost of storage, floor space availability and the time and cost it takes to procure, keep and find the products. Efficiently managing your inventory is a labor-intensive task that takes time, vigilance and dedication. And one-size does not fit all. While you want your inventory management strategy to be as accurate and efficient as possible, you also need it to be practical and cost effective. Proven Inventory Management Techniques You Can Implement in Your Operations There are several proven processes that can help you manage your inventory. The following techniques have proven to help drive revenue, reduce expenditures, increase asset performance and improve business processes. Vendor-managed Inventory Vendor-managed inventory (VMI) is a process in which your supply chain partner assists you with day-to-day inventory operations. This partnership may involve managing your entire facility’s inventory or a specific subset of materials based on your needs. Once you’ve determined the material to be managed, your vendor assumes the management responsibilities. Through the VMI process, your supply chain partner will manage the ordering of materials, delivery and stocking of your shelves—all while managing inventory levels to improve turns, eliminate stockouts of critical or fast-moving items, and reduce stockpiles of just-in-case material. Vendor-managed inventory improves your inventory performance, reduces your warehouse operating costs and saves your employees time—time they can use to focus on your business. Industrial Vending Machines Many companies effectively use industrial vending machines to dispense maintenance, repair and operations (MRO) supplies, safety products and other highly consumable items. Unlike traditional vending equipment, industrial vending machines use employee identification methods instead of cash in exchange for material. This not only creates quick and easy access to material for your crew; it also provides 24/7 access and complete accountability. Inventory usage and levels are tracked in real time. Your supply chain partner can provide services to reorder and replenish materials in the machines, saving you valuable time you could have spent managing these materials. On-site Staffing Sometimes you simply need another set of hands to help manage your storeroom or materials. Your supply chain partner can provide dedicated staff to assist you with inventory management or other procurement functions. These professionals work to understand your business objectives and work with you to drive operational efficiencies and provide you the much needed help to manage these critical assets. Job Site Trailers, Boxes and Carts You may think of inventory management as being in warehouses and storerooms, but it can take many forms. Trailers, boxes and carts at a job site can help you organize and manage materials right where they’re used. Think of these as an extension of your storeroom that help you keep materials at the point where they’re needed most. In addition to keeping the material organized and secure, these solutions save your crews valuable time by not having to visit the storeroom or warehouse when they need materials. Coupled with vendor-managed inventory, job site material management containers can be an effective inventory management tool to save you and your crews valuable time. Product Preassembly Inventory management can also take the form of product preassembly. Just as its name implies, this process involves your vendor partner providing preassembly of components prior to delivery to you. Product preassembly saves your crew valuable time by eliminating some of the tedious assembly tasks often found on larger projects. No more finding the time or space to build on site. Product preassembly can save your crews valuable time to keep your projects on budget and on schedule. Kitting Kitting is a type of preassembly where a packaged product kit is assembled—often with a single part number—that contains numerous components packaged in a single container or package. Creating a kit ensures your workers will have the exact number and type of components necessary to assemble a project or complete a task. Like product preassembly, this saves your crew time—no more wasting costly time finding the right materials and quantities required in the warehouse or storeroom (assuming you have them)—resulting in greater productivity. And you save time in the ordering process as well because you only have to order a single part number instead of a long list of components. Material Staging Material staging is the delivery, storing and securing of material at your designated location or project site as your schedule demands it. In addition to efficiently managing project site storage space, material staging has also shown benefits of minimizing damage and reducing shrinkage often caused when material sits unused for long periods of time on site. Material staging ensures you’ve got the right materials, at the right place, at the right time, keeping your crews focused on the task at hand. Obsolete and Overstock Management Maintaining and stocking obsolete or excess inventory can be costly to your business. Your supply chain partner is a valuable resource to analyze your current inventory to determine what’s current and what’s not. They can help you determine the right amount of inventory for you to keep on hand based on your installed base, lead time, usage and demand. Inventory Management Is Strategy Inventory management is a complex process of determining what material to keep on hand, how much to stock, when to order and when to shift your ordering to meet your facility’s or crew’s demands and needs. It’s a system with many moving parts, and it’s not one-size-fits-all. By implementing one, or a combination of the techniques discussed in this article, you will save time, reduce your costs and ensure you have the right materials when and where you need them.