- On June 2, 2021
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- cfo, Distribution, finance, food and beverage, foodandbeverage, inventory management, inventory technology, manufacturing, smb, warehouse
Did you know the worldwide cost of inventory distortion is estimated at $1.7 trillion annually (1)? This astronomical loss is shocking since inventory is the heart of any consumer goods company! To reduce costs and maximize profits, optimal inventory management is essential for small and midsize manufacturers. Finance executives invest in inventory management technology to adopt best practices that minimize waste, reduce storage costs, cut labor costs, and enhance customer satisfaction.
Decrease Costly Waste
Excess raw materials and products can result in significant amounts of waste. This is especially true for products and materials with short shelf lives, as in the food and beverage space. Technology that helps to simplify materials requirements planning (MRP) helps finance leaders determine the appropriate amount of inventory so warehouses keep just enough inventory in stock to fulfill orders and decrease waste. Furthermore, consumers and legislation want to purchase from businesses that are environmentally responsible, so implementing sustainable inventory management practices can increase your sales.
Minimize Overstock and Storage Costs
Excess inventory is not only costly due to the actual cost of materials and the goods themselves, but overstock can also cause additional storage costs. Reducing stock-outs and overstocks can lower your overall inventory costs by 10% (1) and result in a 10-20% gain in space use (2). With proper inventory management, finance executives can help downsize warehouses or repurpose space for other revenue generating activities. Storage savings are even more significant for perishables like food and beverage or medicinal products.
Reduce Labor Costs
How much does your warehouse labor cost? Consider this…walking and manually picking orders accounts for over 50% of the time associated with picking (2). Finance executives need to increase workforce efficiency to decrease costs. Warehouse automation technology as well as powerful inventory tracking technology enable workers to operate more efficiently. Humans and robots working together can increase productivity by a whopping 85% than either of the two working alone (3)! Being able to locate inventory with real-time updates to handheld devices means your warehouse workers no longer need to search for elusive inventory and can go about picking and packing activities quickly and efficiently, reducing your overall labor costs.
Keep Customers Coming Back
In today’s digital age, customers expect orders to be filled quickly and easily. Having a real-time view of your inventory is essential when it comes to fulfilling orders on time. 34% percent of businesses have shipped an order late because they inadvertently sold a product that was not in stock (1). Considering a single bad experience can deter a loyal customer, inventory accuracy is essential to keep customers coming back! Inventory management software that provides updated, accurate inventory information not only means you can avoid promising products that are out of stock, but also helps reduce out-of-stock situations by allowing manufacturers to use demand forecasting to schedule production and purchase orders.
The fiscal impacts of improving inventory management are clear, so it’s no wonder why 54% of businesses plan to increase investment in inventory and network optimization technologies. Finance executives are responsible for assessing ROI for any sort of investment, and the case for finance to invest in inventory management technology is a strong one. By reducing waste, minimizing storage costs, decreasing cost of labor, and increasing customer retention, optimal inventory management can significantly increase profits!