When businesses discuss inventory costs, the initial costs that come to mind are usually apparent and concrete. Many of them include the following, but they may include many other costs:
storage costs
stockout costs
overstock costs
damaged products
carrying costs
These are essential.
However, there is an often-ignored cost of inventory that we have seen many businesses overlook:
uncertainty.
This uncertainty manifests when a team is not entirely comfortable with the inventory data at their fingertips.
A warehouse employee re-checks a quantity before dispatch.
A purchasing agent delays a replenishment order because the inventory count could be inaccurate.
A sales rep calls a warehouse to confirm an item's availability prior to confirming with a customer.
Each of these interactions could last only a few minutes. Multiply those few minutes by the number of hours in a day and multiply that by the number of teams with a need for this information, and you quickly begin to see significant operational drag.
This results in lower decision speed, operational efficiency, and overall confidence throughout an entire company. This is why inventory management, at its core, should be more about visibility that is trustworthy rather than simple product tracking.
When the inventory information is accurate, up-to-the-minute, and easy for anyone with a role-based need to view, a company loses time spent double-checking and begins to gain time for taking action. The team can begin to move faster.
It can begin to make better decisions.
It can create a more predictable flow of operations. In fact, for most organizations, the value of a strong inventory system is found less in the inventory itself and more in the level of confidence it instills.
To learn more about improving inventory visibility and operational workflows please see:
