Page 13 - Logistics News - Issue 02 - 2024

INVENT O R Y MAN A GEMENT

inventory by considering factors such as lead times, demand 4. Supplier performance monitoring
variability and cost constraints. This strategy enables a business Supplier performance monitoring allows one to evaluate suppliers’
to strike a balance between holding costs and customer service performance for factors like delivery reliability, quality and
levels. For instance, a manufacturer may utilise inventory responsiveness. This is essential for standardisation, smooth
optimisation and employ inventory optimisation software to operation and addressing problems like late deliveries, quality defects
adjust safety stock levels based on fluctuations in demand and communication gaps. For instance, manufacturers track supplier
variability and lead times. delivery times and quality ratings to mitigate supply chain disruptions.

Pros: Pros:
• Improved inventory turnover. • Improved supply chain visibility.
• Reduced holding costs. • Enhanced supplier relationships.
• Enhanced operational efficiency. • Reduced risk of supply disruptions.
Cons: Cons:
• Complexity in implementation. • Dependency on accurate performance metrics.
• Dependency on accurate data and algorithms. • Potential for supplier disputes.

3. Inventory ordering 5. ABC analysis
One of the most crucial stock management strategies is Another valuable technique is ABC analysis, a method used in
inventory ordering, which means determining when and how inventory management to classify items into three categories
much inventory to reorder from suppliers to maintain your based on their importance and contribution to overall sales. This
stock levels. This is important in helping avoid stock-outs and strategy assists businesses in optimising resource allocation. For
minimising excesses. For example, a distributor uses automated instance, a retailer may apply this approach to adjust inventory levels
inventory ordering systems to generate purchase orders based for category A items, which typically have high sales volume and
on predefined reorder points and supplier lead times. profitability.

Pros: Pros:
• Streamlined procurement processes. • Prioritisation of inventory management efforts.
• Improved inventory availability. • Optimised resource allocation.
• Reduced stock-outs. • Improved inventory turnover.
Cons: Cons:
• Dependency on accurate demand forecasts. • Complexity in categorisation.
• Potential for overordering or underordering. • Potential for overlooking lower-value items.

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