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Inventory Optimization: Show Me the Money

Inventory optimization isn’t just about having the right thing at the right time – it’s moreso about not having the right thing at the right time, too. In this article by Marisa Brown, the humbling statistic that the lowest performing organizations spend about 16.4% of their annual inventory value on carrying that inventory, while the top performers spend only 7.3%. That’s an enormous difference, and it means about $48,719,132 dollars in expenses just for managing the stored inventory. Brown gives a few pointers provided through best practice organizations on how to lower the cost of managing inventory, including automation: Automating inventory optimization and embedding technology into the planning process enables organizations to maintain an optimal inventory mix. Although inventory optimization has a strategic component, the dynamic nature of the marketplace requires tying effective inventory optimization technology to an organization’s operational processes and systems. Events that will quickly render obsolete a strategic view of inventory optimization include new product introductions, changing demand patterns, and evolving sourcing alternatives. Ensure that these technological exercises are not done only once, but instead are continual and evolve over time. Other tips include periodic evaluation, senior level support, and the consistent improvement of service levels. Reducing the cost of managing stored inventory can mean big savings for the organization and the whole company, and who doesn’t like that?

About Matthew Kabik

Matthew Kabik is the former Editor of Computer Aid's Accelerating IT Success. He worked at Computer Aid, Inc. from 2008 to 2014 in the Harrisburg offices, where he was a copywriter, swordsman, social media consultant, and trainer before moving into editorial.

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