This document provides an overview of best practices for inventory optimization, emphasizing the importance of effective inventory management in addressing common challenges like stock shortages and obsolescence. It details the goals of inventory optimization, such as maintaining optimal stock levels and utilizing ERP systems to streamline processes. The document concludes by advocating for comprehensive inventory management systems that enhance efficiency and support business growth.

1. Best Practises of
Inventory
Optimization

2. An Overview
• Introduction
• Inventory management
• All about inventory management
• Inventory optimization
• Goals of inventory optimization
• Stat fact
• Why inventory optimization is needed ?
• Inventory optimization challenges
• Best practices of inventory optimization
• Benefits
• Ways ERP can control inventory control
• Conclusion

3. Introduction 1
• One of the biggest challenge that industries face is- figuring out how to manage inventories as per the changing
needs and growth in product portfolio.
• Effective inventory management proves to be the most important part in overall business operations.
• Manufacturing, procurement and sales activities directly impact the inventory handling, but lack of proper
platform to these departments leads to inactive support in inventory decisions
• Lack of inventory management is one of the primary reason why businesses fail.
• Fortunately, there are certain practices that can help you to maintain adequate level of inventory with optimum
resources used and lowered costs.

4. “Inventory management is the management of inventory and stock. As an element of
supply chain management, it includes aspects such as controlling and overseeing
ordering inventory, storage of inventory, location and controlling the amount of
production for sale.“
Inventory management 2

5. 3
• Effective inventory management is the foundation of any product-driven business.
• An ongoing process tracking the moving parts and products in and out of a company’s location(s).
• Knowing where the items are located, what is shelf life and expiry dates, when to restock certain items, what
amounts to purchase or produce, what price to pay – as well as when to sell and at what price – are complex
decisions.
• With effective inventory management, businesses gain a firm grasp on every operation involved in the
inventory optimization .
• With an ERP, you can figure out ways to solve inventory challenges by finding the right product at right time
with accurate details
.
All about Inventory management

6. Inventory Optimization Needs the Right Processes to Make a Difference
Lets know how -
4

7. Inventory optimization
• Provision of managing right inventory, in the right quantities and at the right locations, to meet the supply and
demand of parts and materials.
• The companies that optimize their inventory by reducing inventory items and stock levels, avoid associated
carrying costs and obsolescence write-downs.
• Generate savings by using time formerly spent on inventory management to ensure physical assets’ reliability
and availability.
• In reality, inventory managers face certain issues on daily basis, inventory controls seems to be much more
complicated set of process.
• When inventory management is out of control, the core functions of your business is altered as supply
shortages bring workflows to a standstill.
• There’s a fine line between stock shortages and oversupply, thus the tightrope inventory control managers
balance it daily.
5

8. • To cut down costs and boost efficiency and profitability
• To provide products to the customers without any delay.
• To manage warehouse space effectively without any wastage
• To maintain the product’s quality by letting them stay away from any sort of contamination
• To track product and it’s movement accurately for better decision making.
Goals of inventory optimization 6

9. Inventory and warehouse management is increasing in value and relevance.
The number of warehouses in the U.S. has risen 6.8% over the last five years.
(Source: Bureau of Labor Statistics)
They concluded :
The move away from pen-and-paper based inventory management is a huge step toward success. With the
growth of inventory management programs, companies are able to streamline their inventory processes.
Reference : https://blog.capterra.com/inventory-management-statistics/
Stat Fact 7

10. Why inventory optimization is needed ?
• Inventory challenges occur due to lack of following best practices or relying on old traditional methods, such as
- Manual documentation,
- Unstructured storage layouts and processes
- Inaccurate physical counting
- No tracking over product’s shelf life, et al.
• The challenges lie in the volume of inventory transaction which must be analyzed to identify trends in inventory
use.
• Inventory managers fail to manage products such as - managing 100’s or 1000’s item collectively, each with
their own specifications and characteristics.
• Without any structured process and powerful analytical tools, it becomes an impossible task, resulting in rapid
increase over inventory levels resulting in critical shortages or surpluses.
8

11. 9
• Slow-moving inventory in stock, takes up valuable storage space, eating the company’s bottom line.
• Unexpected stock-outs of products, results in supply chain backorders, lost sales and dissatisfied customers.
• Product surplus leads to excess inventory levels, and increases carrying cost due to more use of warehouse space
and product maintenance.
• No track of products in stock, because the primitive business methods can’t manage growing demands of business.
• Failure to track exact material location results in time wastage in searching the material, and delayed deliveries.
• Inaccurate records (wrong part numbers, incorrect inventory counts) results in manual documentation errors.
• Poor warehouse or stock layouts can increase stock picking time and increase in labor costs.
Inventory optimization challenges

12. 10Best Practices for Inventory Optimization -
Whether you’ve been into business for 5 years or 50 years, it’s never too late to improve your business by switching
to an effective inventory management system.
It isn’t something that’s limited only to your warehouses rather manufacturing segment gets benefitted with a
sound and optimized inventory management implemented for maintenance, tracking, and operations.
Here are a few best practises of inventory optimization -

13. I. Proper Asset Categorization Lays the Foundation :
• First step towards optimization is to properly categorize your company’s assets.
• Defining moveable v/s fixed assets is a broad categorization, but also categorize assets based on a system that
makes sense for your company, i.e. use case, by department, value, or some other metrics.
• Storing information in a central database is the key to maintain precise control over your inventory, quickly finding
the information needed, and analysing the data collected to further optimize your inventory processes.
Best Practices for Inventory Optimization - 11

14. II. Automate, Automate and Automate :
• Without automation, managing inventory is difficult, hence software application comes to the rescue.
• Alerts and notifications feature helps in generating reminders, to know item in surplus or deficit values .
• Asset tracking helps in streamlining processes, making automated documents with accuracy that manual processes
fail to achieve.
• Helps in reducing the frequency of manual inventory counts and saves substantial man hours.
III. Implement quality control :
• Helps in making a checklist that provides all procedures which employees need to follow when checking the goods
they receive.
• This checklist is based on multiple parameters such as- damage signs, product’s characteristics, prices, etc.
Best Practices for Inventory Optimization - 12

15. IV. Simplified Re-ordering processes :
• By tagging products accurately, record-keeping and simple re-ordering can be achieved, which reduces duplicacy
and stores unique identification id of the product.
• With technology available, save your staff time with simplified quick order generation, for the suppliers and
equipment needed.
V. Reduce Repair-Cycle Times
• Establishing and improving lead times for replacement parts and equipment ensures satisfied customers.
• For example: Look for local sources of essential parts and equipment as a way to reduce repair and transportation
time.
• Reducing repair time will minimize downtime and provide a continuous workflow.
Best Practices for Inventory Optimization - 13

16. IV. Simplified Re-ordering processes :
• By tagging products accurately, record-keeping and simple re-ordering can be achieved which reduces duplicacy
and help in storing unique identification id of the product.
• Take advantage of the technology available and save your staff time by making simple orders for the supplies and
equipment needed to keep business processes flowing smooth.
V. Reduce Repair-Cycle Times
• Establishing and improving lead times for replacement parts and equipment ensures satisfied customers.
• For example: Look for local sources of essential parts and equipment as a way to reduce repair and transportation
time.
• Reducing repair time will minimize downtime and provide a continuous workflow.
Best Practices for Inventory Optimization - 14

17. VI. Maintain minimal stock levels :
• Avoid excess inventory, as it adds to overhead charges and creates a shortage of storage space.
• Helps optimize facility layouts to store the most frequently used supplies in convenient areas, with rarely used
equipment, parts, and supplies stored in harder-to-access areas.
• With minimum stock levels, you can forecast how much stock you should have on hand , and actual quantity to be
procured without getting wasted.
• Automatic detailed information and identification of product can help inventory control become streamlined,
directly helping business to grow and improve efficiently.
Best Practices for Inventory Optimization - 15

18. VII. Develop a plan
• After researching different options available, know what’s already in your warehouse, and then develop a plan.
• The plan should contain a complete strategy of how the items will be taken care of.
• This plan should be communicated within all the departments in order to have feasibility check over it.
VIII. Look for multiple management models
• There is no one way of maintaining an inventory.
• Try to figure out which type of arrangement will help you increase shelf life, manage expiries and save space by
proper placing of the items.
Best Practices for Inventory Optimization - 16

19. IX. Categorize your inventory
• Distinguish items and categorize them according to their specifications.
• ABC classification is one of the most common method adopted.
• Aims to optimize warehouse space and make important items available on time.
• Less important items should take less space, more space should be used on the items that are most in demand.
X. Get a handle over demand and supply
• Demand forecasting is key to ensure that even with minimal stock levels, you never run out of needed items.
• The amount of stock needed may fluctuate due to seasonality, the economy or change ins business trends. And so,
the demands and supply should be balanced accordingly.
• Effective forecasting can be achieved if you are aware of the real figures of the items available.
Best Practices for Inventory Optimization - 17

20. Benefits :
• Products and services produced and kept will have a streamlined process and will never get disarrayed.
• With centralized information over all assets and items, you can find location of every item, vendor and supplier
information, specifications, and the total number of a particular item currently in stock.
• Understanding what items move quickly and which items are more slow-moving, helps in enabling the
organizations to determine the right time to reorder items.
A comprehensive inventory optimization model helps in :
- Improved cash flow, by having increased inventory turnover
- Better reporting and forecasting capabilities
- Reduced storage costs (overheads)
18

21. Benefits :
- Reduced dead stock
- Better layout structure of the organization
- Enhanced transparency
- Improved supplier, vendor and partner relationships
- Greater monitoring of the product’s quality
- Optimized warehouse space of the stock kept
- Reduced freight costs
- Reduced costs over immediate purchases
- Identification of seasonality in products will help in planning better
19

22. Ways ERP can help in inventory control
• Overall inventory management by streamlining all the business activities and bringing real-time visibility
across the SCM
• Item administration by classifying products and grouping them with the help of tags.
• Warehouse management by decreasing inventory levels and tracking movement of goods in and out, also
ensures bin access control for determining exact position.
• Inventory replenishment to avoid stock-out and ensuring adequate inventory levels, and forecasting the
demands with precision and accuracy.
• Quality concerns by eliminating poor quality products through multiple testing parameters.
20

23. Ways ERP can help in inventory control
• Physical inventory handling, by mapping and validating physical and system recorded inventory levels
• Inventory analysis, by ensuring warehouses are stocked right and bins are handled properly
• Inventory planning, helps in planning your inventory through MPS and MRP
• Material requirement planning, ensures appropriate material levels are available for production and
necessary products are delivered
• Master production scheduling, helps in knowing what is manufactured, what material is procured and
which schedule plan is to be followed to make them
21

24. Conclusion :
• Implementing a comprehensive inventory management system can be complex, but with an ERP, the process
gets simplified.
• An ERP helps in addressing all business challenges through integration the operations for the people, creating
a streamlined process structure and inheriting technical platform for real time accessibility.
• Following best practices to set up a comprehensive structure is an investment that will pay for itself again and
again through greater efficiency and a boost to the bottom line.
• One such ERP is the BatchMaster ERP- a true process-centric solution serving the manufacturing, distribution,
inventory, compliance and quality needs of your business ecosystem.
22

25. About BatchMaster
• 30+ years of experience
• ERP solutions for small to mid-sized industries
• SAP B1 and Microsoft certified solution
• Over 40,000 users worldwide
• Headquartered in California, with footprints across the
world
• A global presence with offices in 3 continents- North
America, Australia, and Asia
• 7 offices round the globe
• Available in 3 languages- English, Chinese, and Spanish
• Original developer of formulation system in ERP
• Consistent record of never exceeding implementation
time of 350 to 500 hours