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What CFOs Don’t Know About the Cost of Inventory

Inventory Optimization & Management  
04/20/2018

Whether based in retail, distribution or manufacturing, supply chain processes are the backbone of the company. If you can’t provision orders, your bottom line will suffer. Perhaps this seems like an obvious statement but many an organization has brought process specialists in to analyze their flaws and they’re almost always related to inventory management.

Minimizing inventory in stock to maximum efficiency

Having too much inventory, or the wrong kind of inventory, is a significant cost. First, there is the cost of production of said inventory: raw materials, labor and so on. Then there is the cost to store the unsold inventory. Engaging in overproduction where it isn’t warranted by the sales figures is a basic cost issue that plagues many businesses.

Instead, leveraging supply chain planning will bring the necessary data to light to optimize inventory management and help you to predict ongoing and upcoming needs, minimize excess inventory and, ultimately, save on production costs.

End-to-end communication is essential

The ability to unify the various verticals that touch the supply chain process can help eliminate so much confusion. Sales can check inventory before they go ahead and close the deal; they can also flag pre-production and production planning that they expect numbers for certain SKUs to increase in the near future. Marketing gets a sense of what products are working and what aren’t. Planning and finance can clearly see the scope of upcoming needs and how much money they’ll need to provision it.

End-to-end communication within the supply chain processes saves time and prevents costly errors, allows each vertical to work to maximum efficiency and ultimately saves money.

Budget and cash flow are healthier with real-time planning

If you can predict sales flow and inventory needs more accurately with the use of historical and pending orders data, you can budget for upcoming growth times and maintain a healthier cash flow balance.

Break down supply forecasting by location, vertical or even by customer and you have realistic information that can be used not only to manage inventory but to ensure that you are delivering on time and as economically and efficiently as possible.

With predictability comes excellent customer service

If you are able to predict inventory needs and reduce lead time before provisioning, you will be able to deliver to your customers, on time, every time. The benefit of high-quality customer service and provisioning can’t be overstated! A happy customer is a repeat customer.

A healthy the bottom line does not happen by accident. You need to plan for it.

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