Struggling to optimize inventory levels for cost efficiency?

Important to consider not only the demand from customers but also the production/outbound capacity. Due to lack of outbound capacity, backlog can grow, and without taking that into account and without adjusting inbound plan accordingly, warehouse occupancy will increase. That may be especially important when by default the warehouse occupancy balances above 95%.

I'd give it a different perspective: First, get in touch with your target customers and get to know exactly what they want, when and how much, even before optimizing your internal inventory management system. That's crucial in planning and implementing " Just-in-time production approach, especially where space is likely to be a limiting factor. Again, this approach will help in eliminating "dead stocks" in your stores which usually increases the cost of stock taking while adding no value to the business. Secondly, as much as possible, digitalize your inventory management system. This minimizes the " hidden costs" due to loss of crucial data such manual stock ledgers which results into repetition of stock taking and or financial losses.

Working in a pull system is generally better for optimizing inventory because it minimizes costs. In a pull system, products are produced or ordered based on actual customer demand rather than forecasts. This reduces the amount of capital tied up in unsold goods and lowers storage costs. By continuously analyzing sales data and forecasting demand, businesses can adjust inventory levels dynamically to match real-time needs, ensuring they have just enough stock to meet customer demands without excess. This approach allows businesses to be more responsive to market trends and seasonal fluctuations, leading to more efficient and cost-effective inventory management.

Incorporating Lean Six Sigma into inventory management models like EOQ and JIT can significantly enhance efficiency and reduce costs. Lean principles focus on minimizing waste and improving process flow, ensuring that inventory levels are optimized to meet actual demand without excess. For example, using Value Stream Mapping helps identify inefficiencies, while demand management aligns inventory with customer needs, reducing overstock and stockouts. Additionally, standardizing processes and fostering cross-functional collaboration can further streamline operations and enhance overall supply chain performance, leading to improved delivery times and lower operational costs

While technology in inventory management offers automation and real-time data for better decision-making, combining it with Lean and Six Sigma principles enhances efficiency further. Continuous improvement methodologies ensure optimal use of these tools by regularly evaluating and refining processes. This integration not only reduces errors and saves time but also drives ongoing improvements in operational efficiency and accuracy