The Importance of Inventory Management in Supply Chains

inventory management

The management of inventory is necessary for any company so that excess stock is not stored at the company while simultaneously ensuring demand for customers is met.

The optimal balance, however, is often achieved through properly planned and managed inventory.

To help reach this balance, many businesses implement a sales and operations (S&OP) process. The basic purpose of S&OP is to bring the demand management functions of a company, for example, sales forecasting and marketing, together with the operations functions of a company like manufacturing, supply chain, logistics and procurement to level the tactical and strategic plans. This process regularly includes extensive modeling and discussions about the company’s on-hand, in-transit, and work-in-process inventory. These discussions allow the sales and marketing teams to effectively plan for the period, by obtaining a realistic picture of the inventory levels available for sale or to better understand the projected future Available to Promise (ATP). Also, the operations teams are updated with direct sales forecasting information, which can contribute to planning for near-term and future inventory and manufacturing needs. This information can drive a shift in manufacturing plans or changes in procurement needs because of an S&OP decision to focus on specific products, thereby driving the need for additional inventory.

Another way to achieve the balance is through point-of-sale (POS) data for inventory management in the retail industry. Every time a barcode is scanned during checkout it captures data. The information is not only tracked by the retailer but is often distributed to upstream vendors. As items are removed from inventory, in some cases, both the retailer and vendor collaborate together to determine when reordering is needed. Demand information is tracked to determine when the best time to place replenishment orders based on the lead time required and variability present when moving the inventory to a downstream location. At its core, inventory decision-making is used to effectively time when discrete quantiles of supply inflows are needed to handle demand outflows.

If you are looking for ways to improve your inventory performance, TransVoyant Inventory Insights monitor the behavior of on-hand inventory at your nodes, and your trading partner nodes, including raw materials, work-in-process, finished goods as well as in-transit inventory planned to flow in and out of nodes.

What you gain from this insight is not only visibility but the understanding of the behavior of on-hand and projected inventory across your entire network and ecosystem. You also gain knowledge of your business exposure to inventory disruptions in a lane or in a node and the ability to identify trends between inventory and other metrics, such as service levels and supplier performance.

If this information sounds intriguing, please click here to speak with one of our experts regarding your inventory management needs.

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