4 Essential Principles for Organizing and Maximizing Your Inventory Performance

Extracting the most from their investment in inventory is second nature to Best-in-Class enterprises. These high-performing organizations are experts at leveraging their physical inventory practices as a means of achieving peak operational performance. To better understand how this is accomplished, the following article introduces the reader to four of these essential principles and practices.

Dead Stock Mitigation

Dead inventory is that stockpile of items that do not move through the supply chain within a reasonable period of time. Dead inventory is a capital investment with zero return and can be compared to shares of stock in a bankrupt company. The impact of dead inventory on an organization's ROI is potentially calamitous. Savvy managers use the gross margin return on investment (GMROI) formula to analyze inventory management systems. GMROI is arrived at by dividing the firm's annual gross margin by its average inventory cost. Any result above 1.0 means that the organization has a positive GMROI. This is a useful tool as it helps management understand what they are getting out of their investment in inventory.

Efficient Warehousing

Most warehouses are organized in a predictable fashion where similar items are grouped together. This is a mistake. According to the people at Effective Inventory Management Inc., a physical product should be stored in a space (address) according to the relationship between its request (sales) volume and the accessibility of its assigned space. Similar goods are not necessarily drawn down at the same rate. The most accessible warehouse space should be reserved for goods and raw materials that are handled the most. Also, a company should give consideration to assigning inventory to spaces close to other goods that are frequently shipped with them. Pickers should never be walking past dead stock items to find the items they actually need.

Materials Handling within the Enterprise Setting

Materials handling is an industrial practice that concerns itself with solving the problems associated with efficiently moving materials, goods and inventory items from place to place. The practice of materials handling touches on storage, logistics, warehousing, security and inventory controls within a manufacturing or warehouse environment. If you feel like you need professional support overhauling your warehouse, companies like Arpac Storage Systems Corp can assist you with creating and implementing warehouse designs, and helping you better understand storage and transportation options.

Warehouse Management Technology

Using bar coding and other warehouse management technologies will go a long way toward reducing errors and inventory shrinkage brought about by misplaced items. Real-time data concerning on-hand quantities is essential to success in today's highly competitive business climate. Of course, there is nothing truly new about bar coding and tracking methodologies except for the introduction of "bring your own device" (BYOD) protocols which permit employees to bring their personally owned mobile devices to work and link them to the enterprise network.

Certain management consulting studies have shown that embracing BYOD creates worthwhile productivity gains. True or not, organizations today are finding it difficult to keep personal wireless devices out of the workspace. To this end, best-of-breed inventory managers have learned to leverage this cultural phenomenon by placing smartphone readable QR codes alongside traditional bar codes on inventory items and their racks within the warehouse. This provides warehouse personnel with multiple methods of quickly identifying inventory items.

You must wholly understand and refine your warehouse policies in order to maximize your business’ profits and efficiency. If you haven’t updated your warehouse technology lately, you may be missing out on some critical new tools to boost your bottom line.