If you want your business to survive and grow, it must be efficient. Having high levels of inventory waste will quickly erode your profitability. Effective inventory management involves balancing the amount of products you have on hand and the demand you’re facing over a specified period. Here’s what causes product inventory waste and several tips for minimizing it.
What Causes Inventory Waste?
Inventory waste is revenue lost due to unsold or unprocessed product inventory. When you have products sitting idle in your warehouse, it costs your business time and money. Some of the common causes of inventory waste include:
- Overproduction — You manufacture too much of a particular product and are forced to pay for storage, discount prices, or even discard excess items.
- Waste of waiting — You have partially assembled goods in your warehouse caused by supply chain bottlenecks or other production inefficiencies.
- Inventory flaws — You are storing defective goods and materials due to poor manufacturing processes, bad design, or improper training.
5 Tips for Minimizing Product Inventory Waste
Here are five strategies for minimizing product inventory waste.
1. Start With a Good Inventory Count
It will be tough to manage your inventory if you don’t know what you have on hand. Your first step should be to take a comprehensive inventory count to use as a baseline. While this can be done manually, it’s also a good time to establish an online inventory management system.
2. Establish Accountability
Put another manager or employee in charge of effectively managing your inventory and reducing waste. Have that person handle deliveries, inventory monitoring, and quality control. When there are any problems or opportunities, you’ll know who to approach.
3. Understand Your Challenges
Understand your particular inventory challenges so you can address them. Are you ordering too much or misinterpreting consumer demand? Are supply chain partners failing to deliver much-needed parts?
4. Automate Inventory Management
If you haven’t automated your inventory management yet, now is the time to start. An inventory management system allows your business to get a real-time view of its current inventory levels. You can also set up automated re-ordering of products so you never face stock-outs.
5. Use More Drop Shipping
With some products, you may be able to use drop shipping. This allows you to sell items and have another business store and ship them on your behalf. You don’t have to worry about storage costs or order fulfillment, both of which can be costly.
How Outsourcing Part of Your Business Can Help
Another way to minimize product inventory waste is to outsource more complex pieces of your business, such as CNC machining. Instead of stockpiling inventory and risk having too much stock on hand, you can run more frequent, smaller batches of parts or products to minimize waste.
It doesn’t always make financial sense to invest in your own CNC equipment and materials. Instead, outsourcing this part of your business is more efficient and cost-effective. Components By Design can help.
Located in the Charlotte, NC, area, Components By Design has more than a decade of CNC machining and CAD/CAM experience. Our team of professionals provides the support you need before and after the sale. Contact us today for more information about our services.