When it comes to supply chain and logistics operations, cutting costs is essential for both our clients and our own businesses.
Do you know how effective inventory management can slash logistics expenses?
Why do so many businesses miss out on these basic inventory management techniques?
Watch the video below to find out how to reduce your inventory costs!
Cutting Logistics Costs: Inventory Management Insights
We dive into cost-saving strategies for logistics, focusing on inventory management. Given the current emphasis on cost reduction, this topic is crucial. Our consulting firm, Logistics Bureau, has extensive experience in helping clients cut logistics expenses, so let’s explore some essential tips.
Effective ABC Analysis
First, perform a thorough ABC analysis of your inventory. Many businesses overlook this despite its importance. The ABC analysis helps categorize inventory into A, B, and C lines based on their cost and sales volume. Typically, A items represent about 80% of costs with only 20% of SKUs, B items around 15% of costs with 30% of SKUs, and C items the remaining 5% of costs with 50% of SKUs. Identifying and understanding these categories helps in managing inventory more efficiently. Be wary of excessive long-tail SKUs, which might indicate slow-moving products that may not be necessary.
Life Cycle Management
Next, consider life cycle management of inventory, especially concerning SLOB (Slow and Obsolete) stock. Evaluate slow-moving and obsolete items to ensure they’re not clogging up your inventory. Effective management includes smooth transitions between products and minimizing excess stock.
Optimizing the Distribution Network
Your distribution network plays a significant role in inventory costs. Analyze how inventory is deployed across warehouses to avoid inefficient distribution. Ensure that your warehouses are stocked appropriately to prevent excessive transportation costs and lost sales due to stock imbalances.
Reviewing Minimum Order Quantities
Finally, revisit your minimum order quantities (MOQs). Often, businesses focus on unit costs without considering the total cost of ownership. Buying in large quantities might seem cost-effective initially but can lead to high inventory holding costs. Consider ordering smaller quantities more frequently to enhance inventory turnover and return on investment.
Dive deeper into this topic by watching the full video above.
Related articles on this topic have appeared throughout our website, check them out:
- 9 Barriers to Optimal Inventory and How to Break them Down
- 3 Common Inventory Management ‘Sins’—And How to Avoid Them
- How to Fix Your MRO Inventory Squirrel Problem?
- Don’t Let Inventory Levels Bloat Your Working Capital
- Inventory Optimisation: How Much Stock is Right for Your Company?
Editor’s Note: The content of this post was originally published on Logistics Bureau’s website dated October 18, 2023 under the title “Saving Logistics Costs – Inventory“.
