A survey of 421 leading companies by Deloitte, one of the world’s “Big Four” professional services networks, provides overwhelming evidence that better supply chain management translates directly into higher profits.
Deloitte categorised the companies in the survey based on the efficiency of their supply chains. It found that of the companies with strong supply chain performance, 79% boasted revenue growth significantly above industry averages. Of those with less focus on supply chain management, only 8% experienced above-average growth.
A critical component of supply chain management is effective inventory management. Profits suffer if orders aren’t filled on time and goods aren’t moved in sync with both capacity and consumer demand. This is something that makes obvious sense, but that not all businesses pay enough attention to getting right.
No value is added to goods during the time they sit doing nothing in inventory. However, companies are faced with storage costs for these goods, as well as the cost of lost opportunities due to having their capital tied up in stock. Having too little stock on hand is equally damaging – inventory shortages can lead to costly down time and dissatisfied customers, who turn to your competitors to get what they want.
Why inventory management is critical
It has always been true that businesses with well-managed supply pipelines and good control over their stock have an advantage. What’s changed is that even small to medium companies now need to gain tight control over their supply chains if they’re to stay competitive.
Thanks to faster, more reliable Internet connections and increasingly affordable inventory management software, it’s becoming the norm for companies across all industries to track their inventory, as well as consumer demand, in real time. This means that no time or resources are wasted on physically hunting for goods. Deliveries can be made quickly and correctly. At any one time, companies know exactly what inventory they have, where it is and what they still need.
This also means that companies still relying on time-consuming and often inaccurate physical “stock takes”, best guess predictions about demand and outdated inventory management systems will be left behind.
With the example set by companies who’ve got it right, businesses and individual consumers expect to get what they want, pretty much when they want it. They also expect competitive pricing, and cost pressures mean that companies have to manage their inventory efficiently if they’re to survive and grow.
How an inventory management system can help
It can be difficult and time-consuming to move from a traditional inventory management approach – which is often quite fragmented – to a single, integrated approach that makes use of available technology to improve reliability. This is where a software inventory management system that’s customised to integrate with your existing business systems can make all the difference. Once this type of system is in place, it becomes easy to track every item of inventory, from any location and at any time.