Page 14 - Logistics News - Issue 02 - 2024

INVENT O R Y MAN A GEMENT

6. Safety stock 9. Just-in-time (JIT) inventory
Safety stock means holding extra inventory readily available in Just-in-time (JIT) inventory strategy minimises the holding
your warehouse to limit the risk of stock-outs caused by demand costs since it works by ordering and receiving inventory only
variability or supply disruptions. This inventory strategy in supply when production or customer orders require it. This inventory
chain management provides a buffer to ensure continuity in your management strategy reduces waste, streamlines the supply
operations and customer satisfaction. For instance, a distributor chain operations and increases efficiency.
can use this strategy to react to and accommodate sudden
spikes in customer orders, especially when supplier delays occur. Pros:
• Reduced inventory holding costs.
Pros: • Improved cash flow.
• Risk mitigation. • Enhanced efficiency.
• Improved customer service levels. Cons:
• Enhanced supply chain resilience. • Dependency on reliable suppliers.
Cons: • Risk of stock-outs during supply disruptions.
• Increased holding costs.
• Potential for excess inventory. 10. Dropshipping
Dropshipping is a method where retailers sell products without
7. Inventory forecasting stocking inventory. Instead, they rely on suppliers directly fulfilling
Another method of inventory management is forecasting, which customers’ orders, offering a flexible and cost-saving option
means predicting the future – much like demand planning. This that removes the need for inventory management entirely. Here,
strategy covers the demand for goods. Manufacturers using e-commerce retailers will team up with dropshipping suppliers
inventory forecasting models can anticipate seasonal demand to broaden their product range and enhance customer retention
fluctuations and adjust production schedules accordingly and satisfaction.
to optimise inventory levels, reduce stock-outs and improve
customer satisfaction. Pros:
• Reduced inventory management overhead.
Pros: • Expanded product offerings.
• Improved inventory accuracy. • Cost savings.
• Better resource allocation. Cons:
• Enhanced supply chain efficiency. • Limited control over product availability and shipping.
Cons: • Reliance on supplier reliability.
• Dependency on accurate data and forecasting models.
• Potential for forecasting errors. 11. Cross-docking
Cross-docking unloads incoming goods from suppliers from
8. PAR levels inbound vehicles and loads them directly onto outbound
Periodic automatic replenishment (PAR) levels refer to vehicles. It minimises warehousing and storage needs, such
predetermined inventory thresholds that trigger automatic as distribution centres that transfer products from docks to
replenishment orders when reached. This helps businesses retain outbound trucks to happy customers.
consistency of stock levels and reduce any manual inventory
management steps. For example, a health care facility can set Pros:
PAR levels for medical supplies to ensure uninterrupted patient • Reduced warehousing costs.
care via efficiency in inventory management without having to • Improved order fulfilment speed.
look at it themselves. • Enhanced supply chain efficiency.
Cons:
Pros: • Dependency on efficient logistics operations.
• Automated replenishment. • Potential for increased transportation costs.
• Reduced stock-outs.
Cons: 12. FIFO and LIFO
• Dependency on accurate PAR level settings. First-in, first-out (FIFO) and last-in, first-out (LIFO) are customer-
• Potential for overstocking. based inventory management strategies that determine the

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