Effective inventory management involves synchronizing your inventory models, business processes, and enterprise software systems with corporate goals and metrics.

For example, if you have highly uncertain demand, but have a central warehouse that feeds regional distribution centers or stocking locations, you can gain significant benefits from pooling inventory risk and using postponement strategies.

Or, if you manage a large number of parts that vary in value and service level needs, you can get significant benefits from a precise ABC analysis of your parts to tell you the key parts you should focus on.

We have identified a list of 15 best practices that will help you ask the right questions and make the right changes to how you currently manage your inventory. Before you implement these practices, however, put a plan in place to ensure that your enterprise systems and business processes adapt to the change gracefully.

The 15 best practices:

1. Have a global inventory optimization strategy as well as a local inventory optimization strategy.
2. Establish inventory management metrics at global and local levels, and measure them consistently.
3. Link safety-stock strategy to customer service levels.
4. Separate predictable demand from unpredictable demand when determining safety stocks.
5. Work on reducing your ordering costs, rather than building them into your inventory management model.
6. Use postponement where possible -- achieve this by maintaining inventory closer to the customer, assembling products closer to the time of need, and maintaining a lean and responsive supply chain.
7. Balance inventory in your network when demand patterns shift.
8. Take advantage of risk pooling by consolidating inventory and increasing responsiveness (thereby averaging out your risk).
9. Watch the product life cycle -- inventory management strategy should follow the product life cycle (ramp up after new product introduction, steady state, and ramp down at end-of-life).
10. Conduct an ABC analysis of your items according to business value, and increase focus on the A items.
11. Benchmark your strategic inventory management metrics (e.g. inventory turnover ratio) against competition and industry.
12. If there is only one thing you do to manage your inventory, make your inventory visible to all levels in your company.
13. Ask your suppliers how you can help them manage inventory better.
14. Manage inventory collaboratively with your suppliers. Pushing inventory costs on to your suppliers can sometimes increase the systemwide cost and decrease systemwide responsiveness.
15. Use business intelligence and analytics to find the slowest and fastest moving parts and make those parts visible.

Not all best practices listed above will work for you or even apply to you. A good approach is to first identify the cost drivers and value drivers in your supply chain, and work backwards to evaluate each best practice or strategy that works for your supply chain.

Ask us how Entercoms can help you optimize inventory in your supply chain using the systems and data you may already have.