Inventory Management Optimization

Inventory control or stock control is the process by which a company controls and counts its stock. Stock or inventory is an item that is purchased for any reason but is stored, or sold in its original form before, between, and after use.

The science of inventory management is not just counting stock; it is all about ordering the inventory based on a need-to-use basis, or just-in-time (JIT) system that reduces procurement expenditure, reduces wasted stock space, and inventory management costs.

Most companies in the world require inventory management optimization to reduce the levels of their inventory, as well as categorize, allocate, and follow the inventory as it comes and goes through the system.

Inventory management is split between direct and indirect resources, where direct resources are items used as an integral component of a product to be sold, such as sugar in confectionary, or copper wire in a DC motor. It can also be an aluminum alloy used in a casting process or LED unit. Direct inventory is anything from a raw ingredient to a finished assembly or third-party product used to complete something that is being sold by the company. Indirect resources are anything that is not direct and includes tools, equipment, machinery, hygiene and nutrition, and, well anything that is storable. As such, the only items not included in inventory control are HR, Finance Asset Management, and CAPEX.

Optimizing inventory control has three foci points, these are the warehouse for optimizing incoming, outgoing, and stored items, as well as optimizing kitting and waste management: marketing with Production Planning to determine the levels and requirements of inventory needed, and procurement which includes logistics that handles the purchasing and transportation of the inventory to the company. There is a fourth focus, which is waste disposal, but this is not considered to be a direct inventory management issue, but rather an overall sustainability issue.

Inventory control systems

There are many options to consider in a warehouse, but they all start in two places; the site itself, how space is managed for use, and the office for inventory management automation control. The physical aspects of a warehouse and the automation process are entwined, but basic automation can stand alone without any electromechanical systems in place.

The tools used to optimize space include racking and platform solutions, conveyors, and automated storage vehicles. Basic optimization starts by defining the three dimensions of the warehouse space and then restructuring the site for categorical management. This means that faster-moving items are kept at the front, and kits are created where necessary. Automation applications such as barcode readers are added to help with fast identification, and electronic counting devices are added to speed up the real-time count in stock.

Automated software includes warehouse management systems that integrate with ERP systems to enable automated decision making such as setting minimum stock levels to initiate a purchase order directly bypassing the purchase request. The bypass is initiated at the supply chain level, where framework or annual orders are set with suppliers.

Other automated initiatives include how the materials are audited when leaving the warehouse and where they are and at what stage in any process they might be.

Finally, the issue of waste management is key to maximizing cost efficiency, where a lot of materials can be sold, or recycled. There are issues with separate storage facilities as well as secure storage locations for toxic materials.

upKaizen specializes in a comprehensive inventory control optimization process. We take a holistic view and approach the issues of what, where, and how by assessing the entire production process as well as the engineering systems that support it. We also factor in the expenditure of office supplies and IT, where standardizing printers reduces ink costs, creating framework contracts reduces the time to order, and assures faster delivery.

We also analyze warehouse locations and restructure using 4D software to asses both dimensional and time, where time is a loss or lean factor and must be added to any efficient automated and optimized inventory control system.

To conclude; inventory control optimization can be very basic providing significantly individualized (focused on one resource or process) reductions in cost for specific resources, or it can be holistically efficient providing a complete overhaul of the entire inventory flow and structure in a company.