Seven Tips for Managing Inventory Turnover

by Ralph Cox, Principal, Tompkins International

Although many companies find themselves bogged down with inventory and feel there is no good solution in sight, there are several ways to successfully reduce inventory and increase turnover without purchasing or renting more storage space. Your company can save time, costs and labor by using these seven key guidelines:

First, and most direct, is to reduce lead time from vendors and suppliers.

Second, and very important, although sometimes more difficult because of organizational alignment, lack of technology or other factors, is to increase forecast accuracy.

Third, and potentially a technique to increase sales revenue as well, is to reconcile safety stock policies with management priorities across the product line.

Fourth, is to reduce purchase transaction costs (distributors) and set-up/changeover costs (manufacturers).

Fifth, is to work off overstock at the distribution centers (any firm) and at stores (retailers) by transferring slow-moving inventory to facilities where the demand exists in lieu of purchasing additional quantities.

Sixth, is to purchase or manufacture to-order instead of to-inventory, when lead time and capacity allow, or use postponement techniques.

Seventh, is to incorporate forecasting and inventory performance into the firm’s continuous improvement program, and measure, report, and review results against goals.

There are numerous ways to take better control of inventory and decrease its associated costs. The key to managing inventory successfully is to continuously measure your performance and look for new ways to improve. These seven tips should get your organization thinking about the best way to achieve inventory reduction in your organization. Many of these strategies may seem challenging to implement, but the benefits can be golden in the long run.

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