Without optimized inventory management, your organization is at risk for a wide range of business challenges. This includes long wait times for needed parts, over investing in low-demand parts, workflow disruptions, and excessive downtime, resulting in a significant reduction in profits.
You can avoid these challenges by incorporating high-impact inventory management best practices into your operations, such as investing in inventory management software to increase productivity and effectively manage costs.
Here are seven best practices to improve your overall operations through better inventory management.
1. Use bar codes to accurately manage inventory
Bar codes are ubiquitous in today’s warehouses for many reasons. Parts inventory is easier to track when you can scan each item from a device or smartphone.
You can lower administrative costs, reduce data entry errors, verify the right parts for each job, and improve turnaround times.
Bar coding rapidly provides details about every item stored in the warehouse. As a result, the entire team can instantly capture the information they need on each part to complete work and sales orders.
2. Track your on-the-shelf inventory value
Inaccurate inventory counts and ordering parts on an as-needed basis lead to delays on work orders or unexpected expenses when the parts are not available.
Keeping an inventory of parts can become a difficult balancing act between having too much inventory and delaying work due to a lack of required parts.
Effective inventory management means you have the right parts when you need them to complete your work orders, but not so many that they’re taking up valuable shelf space and depleting your financial resources.
And that means knowing when to order more parts and exactly how much to order.
Inventory management software eliminates the guesswork by automating cycle counts within your equipment maintenance software. It makes it easy to see when you are running low on parts so you know exactly when to re-order them to maintain an ideal balance.
3. Use your dashboards to their full potential
An essential component of any enterprise asset management (EAM) application is customizable dashboards.
They provide a home base for you to easily and quickly access your asset data from multiple perspectives, including the status of work requests.
You can see valuable trends you can use to make better business decisions, such as scheduling, assessing, and planning.
Two key dashboards — work request dashboards and maintenance dashboards — support optimized inventory management.
Work request dashboards provide a clear view of the work requests waiting to be processed, while maintenance dashboards give you real-time insight into how much work is being assigned to each team member. That way, you can ensure workflow is distributed optimally across work requests.
4. Create KPIs for inventory management
Continuous quality improvement in your inventory management processes leads to efficiency, heightened productivity, and greater profitability.
An ideal way to guide the improvement process is to link inventory management to key performance indicators (KPIs). KPIs are measures of value that tell you how well your organization is meeting its goals over time, such as:
- Backorder rate
- Stock-to-sales ratio
- Inventory turnover rate
- Days or weeks on hand
Make sure your indicators are meaningful and applicable by tying them to your organizational objectives and strategies. Your upper limits should be both realistic and aggressive enough to achieve optimized performance.
At the same time, lower limits should provide enough opportunity for managers to implement actions to recover performance without falling short of the overall objective.
5. Integrate your software systems
An inventory management system contained within your EAM is most effective when it’s connected to your accounting or purchasing software.
When your inventory system is integrated with your back-office systems, it can effectively optimize your inventory, ensuring your financial reports are always accurate.
This helps you plan effectively, execute predictably, and minimize human error and labor costs.
6. Calculate your efficiency
By analyzing your inventory data, calculating your inventory turn ratio, and determining your part criticality, you can reduce unnecessary inventory expenditures. An EAM system that delivers real-time data is one of the best tools to locate the sources of both waste and demand so you’re never overstocked or understocked.
To estimate your turnover ratio, divide the dollar value of the inventory you’ve used over the past 12 months by the dollar value of the inventory you have on hand today.
To determine the true cost of holding a given part in your inventory, take a look at your maintenance history.
Some parts are difficult to source and install, which means a longer downtime. A part may be costly to carry in stock, but may also dramatically reduce overall downtime. Balancing the tradeoffs is the core outcome of solid critical analysis.
7. Balance your overstock inventory
To manage your inventory effectively, find the balance between the minimum and maximum parts in stock.
This will help you order parts at the right time to minimize shelf time and figure out how often you need to replace parts on each of your assets.
It will also show you the minimum level required to ensure you have the parts you need when you need them, and the maximum level required to balance need with space, budget, and logistics.
Get inventory management software for best practices
These best practices can make the difference between a disorganized organization and one that operates at the optimized levels of productivity, efficiency, and profitability.
ManagerPlus’s software for inventory management takes all of these needs into account. We offer cost-saving and time-saving features, including:
- Integrations with existing software, such as purchasing and accounting
- Ability to see parts needed versus parts on hand
- Inventory cost overview and calculations
- Customizable dashboards
- Barcode tracking
More organizations are relying on high-performance inventory management systems to ensure they gain every advantage in today’s demanding business world.
See how ManagerPlus’s inventory management software can help you meet your business goals.