Inventory management and planning are critical to the profitability of your organization. Businesses can enhance their purchasing and manufacturing processes, cash flow, and profitability by employing key performance indicators (KPIs) to manage and track inventory. Throughout this blog, we will highlight 5 key performance indicators (KPIs) that will help an organization boost its inventory planning and streamline its operations. KPIs also allow businesses of all sizes to assess the impact of their daily activities.
We recommend using the following 5 KPIs in a systematic approach to optimize your inventory planning and management process!
1. Inventory Management Analysis
• The first critical KPI is a detailed review of the inventory management process to determine its current scenario. By observing how the various process units interact, you may determine whether there is a definite division of tasks or an overlap in duties.
• These defects should be prioritized based on their impact on the process, and improvements should be suggested.
• The evaluation would benefit from comparing the company’s inventory management systems to those of the industry’s major competitors.
• Inform all stakeholders about the assessments’ results and suggested improvement initiatives so that they may participate in the improvement process.
2. Construct an Inventory Management Strategy
• An action plan should be created based on the evaluation results. Inventory must be classified as raw materials, work-in-process inventory, and finished products.
• A good action plan would have separate action plans for each of these comment threads, which would then be merged to create a comprehensive inventory plan.
• Quality control standards and operational definitions should be incorporated into the inventory management process. This is especially important if the company has recently undergone a merger or acquisition that resulted in revised requirements.
The first step in this procedure is to fix operational shortcomings.
3. Put the Strategy into Action
• The second process should be to put the strategy into action. Management must only approve changes to the strategy when they are necessary.
• All stakeholders in the inventory process, including suppliers, should communicate and collaborate openly.
• It is important to define each unit’s function in the inventory process and assign duties accordingly. To make implementation and task distribution simple, the inventory management system must be standardized.
4. Evaluate Performance in Relation to the Strategy
• Any inventory process action that deviates from the established plan needs to be looked at and corrected right away.It is equally important to conduct regular inventory audits in order to maintain efficiency
• Furthermore, to assess the performance of each stakeholder and the organization, specific key performance measures and Key Success Indicators (KPIs) should be established. Therefore, metrics results should lead to appropriate actions.
• The expense of inventory transporting, and warehousing should be evaluated. These metrics include the percentage of total inventory value that represents the carrying cost of inventory. The percentage of total inventory value spent on storage and shipment, known as COGs (Cost of Goods), is also crucial.
5. Constantly Strive for Improvement
• To keep the inventory process efficient and make it strong enough to handle unexpected situations like supply chain disruptions, opportunities for improvement should be sorted out.
• An optimized just-in-time delivery system requires continuous evaluation, improved data analytics, and fewer minimum stock orders.
• It is also necessary to investigate process irregularities and define solutions, as well as to increase employee operational expertise, collaborate with suppliers to implement operational improvement initiatives, and reduce cycle and lead times across the board.
Improving processes through the inventory management phase of your supply chain operations can have a large impact on the overall efficiency and effectiveness of your organization. Optimizing the flow of your inventory operations will help you keep better track of key trends in your inventory. This will leave you better prepared to manage this and more aspects of the inventory management phase of your supply chain.
TechnoRishi Inventory Control Software makes it possible for you to avoid stockouts, make prompt reorders, and monitor the stock level automatically whenever sales or purchases are made.
Visit our website to learn more about the Software and click below for a product demonstration.