17 inventory management ideas to help reduce inventory costs and improve management of forecasting and inventory
F. Curtis Barry & Company collected the following inventory cost saving strategies through years of working with multichannel companies to: improve the management of the inventory assets; enhance planning, forecasting and analysis; devise inventory strategy recommendations tailored to the unique needs of the business; modify organizational structure to be more efficient; and to implement more effective forecasting and inventory management systems. We've addressed issues of inventory cost savings and cost reduction with companies large and small. Some of our clients include Chadwick’s, Brylane, Charming Shoppes, The Art Institute of Chicago, Gardener’s Supply, PetEdge, Bare Necessities, Frederick’s of Hollywood, Highlights For Children, LifeWay Christian Resources.
Need inventory management ideas that address your organization's unique situation?
Have you developed the necessary metrics for initial customer order fill rates, final fill, inventory turnover, gross margin, lost margin from liquidation, age of inventory, etc.? In turn have these become performance objectives for the Inventory Control Buyers? Contact us if we can help your company with an independent internal benchmarking study.
2. Streamline process
Assess the processes of seasonal planning, weekly forecasting, end-of-season analysis for your multichannel business. Streamline how the Inventory Control buyers perform their work and manage inventory. Process improvement should improve planning and forecasting accuracy, and lead to improvement in customer initial order fill rate and turnover.
3. Know your vendors
What are your vendors' pain points (space, cash, capacity)? What are their strengths? Understand these thoroughly to gain maximum leverage. Should you reduce the number of vendors you purchase from to get more leverage?
4. Establish a vendor scorecard
Involve Merchandising, Inventory Control, Fulfillment and Accounting and set up a vendor scorecard to evaluate vendors. This should include sales, margin, on-time delivery, significant problems, etc. Review it several times a year with the vendors. You may even want to take it a step further and set up a vendor recognition program for the top vendors.
5. Visit your top 20 vendors now
This strengthens relationships. Include at least the Merchant and Inventory Control Buyer. Involve vendor’s senior management as well as yours. Have an agenda about your company’s direction, needs and expectations.
6. Manage your vendors
Insist on costs, terms, and conditions with vendors that make sense for your company. It is your responsibility to look out for your interests, theirs to look out for theirs! Develop vendor compliance and charge back policies to enforce compliance.
7. Negotiate terms
Arrange and pay 2%10Net60 with all domestic vendors.
8. Provide limitless access to information systems
Inventory Control Buyers must have laptops and VPN access to all tools. This pays for itself quickly and frequently.
9. Invest in systems
Provide Inventory Control Buyers easy, efficient, accurate, and timely access to data. Ongoing training, report requests, modification requests should be a management priority. This group spends more money than any other. Support them! See more on Inventory Management Systems Implementation Strategies.
10. Invest in inventory control staff
The Inventory Control Department manages the largest balance sheet asset in the company. Hire and retain strong people, provide them tools, have high expectations of them, then reward their solid performance well. Should you have a different organizational structure?
11. Consistent forecasting philosophy
Be sure all categories and SKUs are forecast using consistent methodology that fits your organization. Challenge it often.
12. Review, recite, and retain key data
IC Buyers MUST know their category and vendor inventory levels, turns, SKU count, and GM $ and %. More importantly, understand the impact of their actions to these metrics and to the business.
13. Clear a day’s-work-in-a-day
Ensure timely and accurate data across the organization by demanding all receipts, put away, invoices, PO acknowledgments, orders, (all business transactions) are posted daily.
14. Renegotiate (always)
New PO’s for in-season replenishment of items selling over forecast are due better costs. Ask early and assertively for RTV and/or mark down money for poor performers.
Is your company aggressive enough in identifying potential overstocks and putting them into one of 15 different methods used in multichannel companies? Reduce slow selling stock as close to in-season as possible to gain a higher cost recovery.
16. Inbound freight
Have a qualified consultant perform a freight audit to see what additional savings can be gained. Join a freight consortium to maximize savings. Learn more about how an analysis can help with freight cost reduction.
Imported products now represent 50% to 70% of all products in many companies and they give a considerably higher initial mark up and maintained margin. Is your staff managing this inventory effectively? They require longer lead times and higher vendor minimums, which can lead to higher inventories and slower turnover.
These Inventory Cost Saving Strategies Are Just the Beginning.
If you are struggling with reducing inventory costs at your company, contact us. Our team can help your organization with tailored forecasting and inventory strategies. Call (804) 740-8743 to get started.