How do you monitor and manage inventory levels and costs?

1 Inventory metrics

To monitor and manage inventory levels and costs, you need to measure and track some key inventory metrics. These include inventory turnover ratio, days inventory outstanding, economic order quantity, reorder point, and safety stock. These metrics help you assess how efficiently you are using your inventory, how quickly you are selling or consuming it, how much inventory you need to order and when, and how much buffer inventory you need to prevent stockouts.

2 Inventory forecasting

Inventory forecasting is the process of estimating the future demand and supply of inventory based on historical data, market trends, seasonality, and other factors. Inventory forecasting helps you plan your inventory purchases, avoid overstocking or understocking, and adjust your inventory levels to meet changing customer needs. You can use various methods of inventory forecasting, such as qualitative, quantitative, or hybrid approaches, depending on the availability and accuracy of data.

3 Inventory control

Inventory control is the process of maintaining the optimal level of inventory to meet customer demand and business objectives. Inventory control involves setting inventory policies, procedures, and standards, such as inventory classification, ordering frequency, replenishment methods, and inventory audits. Inventory control helps you reduce inventory waste, shrinkage, obsolescence, and theft, and improve inventory quality, accuracy, and visibility.

4 Inventory optimization

Inventory optimization is the process of finding the best balance between inventory costs and service levels. Inventory optimization involves using mathematical models, algorithms, and software to analyze inventory data and determine the optimal inventory mix, location, and quantity. Inventory optimization helps you increase customer satisfaction, reduce inventory carrying costs, and enhance operational efficiency.

5 Inventory reporting

Inventory reporting is the process of communicating the inventory performance and status to the relevant stakeholders, such as management, suppliers, customers, and auditors. Inventory reporting involves creating and updating inventory reports, dashboards, and KPIs, such as inventory value, inventory accuracy, fill rate, stockout rate, and inventory aging. Inventory reporting helps you monitor inventory trends, identify inventory issues, and make informed inventory decisions.

6 Inventory improvement

Inventory improvement is the process of continuously reviewing and enhancing your inventory management practices and outcomes. Inventory improvement involves collecting and analyzing feedback, data, and best practices, identifying and implementing improvement opportunities, and measuring and evaluating the results. Inventory improvement helps you keep up with the changing customer expectations, market conditions, and business goals, and achieve inventory excellence.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?