Uncovering The True Cost Of Poor Inventory Management In Manufacturing
No business wants an excess of inventory taking up valuable space in their warehouse or storage facility, tying up much needed cash flow. Similarly, it can be a minor disaster if stock outs and line downs mean production grinds to a halt. That’s why managing inventory and being able to walk the line between lean and agile manufacturing and always having the right tools and materials to hand when you need them is so important.
After a run of impactful disruptions to global supply chains such as the pandemic, regional conflicts and even container ships getting stuck in the Suez canal, some inventory managers have developed nervous habits resulting in a trend of over stocking. It’s understandable, when the fragility of the global supply chain is laid bare it can be tempting to order in more stock to ensure that costly downtime is avoided. However, excess inventory comes at a cost. Not only is there the additional capital needed to purchase it, but it is then tied up in the goods and materials until such time you can use them. In addition, you also have the service and storage costs to consider, as well as obsolescence and other forms of loss to contend with.
It's worth taking a closer look at the true hidden costs of poor inventory management below, before discovering more about how vendor managed inventory could be an effective solution to help you strike the right balance.
The Hidden Costs Of Excess Inventory
Poor inventory management and a reliance on inaccurate data can distort demand forecasts. This in turn causes exaggerated fluctuations across the supply chain, leading to inefficiencies, increased costs and even strained relationships with suppliers and distributors. This can have a costly and ongoing impact on operations.
Warehousing and storage costs are another major consideration, with every square foot of space you use to store materials costing money. There is also the fact that in the fast paced world of modern manufacturing, parts and materials can become obsolete as they sit there on your shelves.
In addition, without effective inventory reporting, you can't accurately predict your cash flow needs. This can lead to missed opportunities and strained finances and is another of the more common inventory management problems.
Shortages And Stockouts
Just like having too much inventory can be costly, running out of key components can also be hugely problematic and is one of the key consequences of poor inventory management. Running out of critical supplies due to inaccurate inventory management can put a stop to the production process, resulting in lost time, reduced revenue and frustrated customers.
Similarly, losing or misplacing consumables can also be a financial drain, impacting your bottom line. And not having access to the right tools when you need them can interrupt workflows.
Vendor Managed Inventory Solutions
There are numerous managed inventory solutions businesses can use to help them stay on top of inventory, such as TwinBin or Kanban inventory management. However, more and more businesses are utilising vendor managed inventory solutions, which sees suppliers take charge of your inventory. These kinds of smart inventory systems enhance the efficiency and effectiveness of VMI by automating processes, improving demand forecasting and providing real-time visibility.
Here at Rivetwise, our vendor managed inventory program monitors rivet usage, records user details and prevents stock shortages. It analyses consumption patterns and aids in predicting future requirements, helping to manage cash flow. This ensures our customers always strike the balance between having enough, but crucially not too much stock at any one time.
Submit your consumable usage today understand how much money you could save with our VMI solutions.
