Want to find out why your warehouse costs are getting higher and higher?
Inventory waste is costing companies a collective $1.6 trillion annually, including shrinkage, stockouts, and the worst one — excess stock.
Let me show you how to solve this with sustainable inventory optimization best practices…
Here’s what we’ll cover:
- Why Sustainable Inventory Optimization Is Important
- The Actual Cost Of Poor Inventory Optimization
- Best Inventory Optimization Solutions That Really Work
- How To Start Implementing Sustainable Inventory Optimization Best Practices Today
Why Sustainable Inventory Optimization Is Important
Let’s cut to the chase…
Sustainable inventory optimization is not a buzzword about eco-friendly initiatives. It’s all about structuring your business in a way that’s more profitable and less wasteful.
If you optimize your inventory sustainably, three things happen:
- You significantly reduce your carrying costs
- You free up working capital
- You create a more resilient supply chain
And the best part? There are trusted inventory optimization software these days that make it simple to track, forecast and manage your stock levels with just the right balance of efficiency and accuracy. Inventory optimization solutions leverage AI and machine learning to help businesses forecast demand and prevent both stockouts and overstocking.
In other words — sustainable inventory management practices mean you have exactly what you need when you need it without the waste.
Isn’t that great?
The Actual Cost Of Poor Inventory Optimization
Did you know…
Inventory management that doesn’t work is not only an inconvenience. It’s actively killing your profit. Recent research says that 43% of small business owners admit to not tracking their inventory at all or only use outdated manual methods to manage it.
Gasp…
And this brings a few problems:
When your inventory is not optimized, these things happen:
- Excess stock taking all the warehouse space. More stock than necessary means more storage costs, more insurance, and much more risk of obsolescence.
- Stockouts destroying sales Running out of inventory literally means lost sales, and unhappy customers who might end up buying from your competitors.
- Capital being tied up Money that sits in excess stock can’t be spent on growing the business, marketing or other opportunities.
And if you think that’s bad enough.
Excess inventory also leads to environmental waste. Products that stay on the shelves for too long become obsolete and are eventually thrown in the landfills. This is bad for the planet and can seriously damage your brand image.
The best practice in this case? Inventory optimization solutions that will balance supply with actual demand.
Best Inventory Optimization Solutions That Really Work
Ok, let’s look at what really works in 2024 and beyond…
The approach to inventory management has changed over the years and companies can no longer guess and use simple spreadsheets to manage stock levels. You need modern tools that give you real-time visibility and precise forecasts.
Demand Forecasting Powered By AI
Ok, this one is a game-changer…
Businesses that use demand forecasting solutions are witnessing some pretty exciting results. Demand forecasting tools analyze past sales records, market trends, and even external factors like weather or economic conditions to help businesses predict the future demand for their products with frightening precision.
Businesses that have integrated demand forecasting tools have seen up to a 10-15% reduction in their overall inventory and actual improvements in their stock availability.
Yes, that’s the sweet spot.
Real-Time Inventory Tracking
Ok, let’s say goodbye to monthly stocktakes that are already old by the time you complete them.
Real-time inventory tracking uses RFID tags, barcodes, and IoT devices to provide you with real-time visibility into your stock levels. You instantly see what you have, where it is, and when you will need to reorder it.
There is no more guesswork that leads to over-ordering or emergency shortages.
Cloud-Based Inventory Management
Cloud-based inventory management systems have changed the game for many businesses. But why?
First of all, with cloud systems everyone in your organization can access the same real-time data from any location.
Warehouse team can see the same data as procurement and sales team. This way inventory miscommunications, which previously could happen within your business, are reduced to a minimum.
Plus, cloud-based inventory management systems are scalable to your needs without a need for massive infrastructure investments.
Automated Reordering Systems
Automation is where this all comes together…
Automated reordering systems use algorithms that keep track of your inventory levels. When the stock hits a certain threshold, the systems send automatic purchase orders.
No more manual monitoring and checking or last-minute panic.
Automated reordering systems also take into account lead times, minimum order amounts and even seasonal demand patterns to ensure you always order the right amount and at the right time.
Pure efficiency.
How To Start Implementing Sustainable Inventory Optimization Best Practices Today
Ok, let’s assume you want to transform your inventory management. What do you do?
Start With An Audit
You can’t optimize what you don’t know.
Start by doing an inventory audit to get a sense of what you have and what your business actually needs. In particular, look at:
- Slow-moving items that are occupying too much space
- Fast-moving products that often run out of stock
- Seasonality patterns in your sales history
- Supplier lead times that might fluctuate
This will help you to have a baseline that you can work from to make informed decisions.
Invest In The Right Technology
Ok, you might not be aware, but 78% of eCommerce companies are planning on adopting or expanding inventory management automation by 2025.
Don’t get left behind in the dust.
Invest in inventory optimization solutions that work with your existing systems and provide the features you need. Look for:
- Demand forecasting
- Real-time tracking and alerts
- Multiple location support in case you have more than one warehouse
- Advanced reporting and analytics
The right tech will pay for itself in reduced carrying costs and more efficiency.
Adopt Just-In-Time Principles
The idea behind JIT (Just-In-Time) inventory management is to receive products just before you need them. This way you order much less inventory to stock at your warehouse.
It’s a great idea but it requires accurate forecasting and a solid supply chain. But if you can nail that the results are tremendous.
You free up much more space, reduce waste, and keep capital available for other business needs.
Build Supplier Relationships
Sustainable inventory optimization solutions don’t just exist in your business. It also requires strong supplier partnerships.
Partner with your suppliers to:
- Reduce lead times where possible
- Establish flexible order quantities
- Improve communication about delays or issues
- Explore VMI options (vendor managed inventory)
Building supplier relationships will give you the much-needed agility to react quickly when demands change.
Monitor And Adjust Regularly
Ok, there is no such thing as a perfect inventory optimization solution that you set up once and completely forget about it.
Market conditions change, your customers’ needs and preferences change, and your supply chains also evolve.
Review your inventory metrics at least once a month and look at your turnover rates, carrying costs, and forecast accuracy. Use this data to make incremental adjustments.
The winners are the ones who remain flexible.
Make It Happen
Sustainable inventory optimization is one of the fastest ways to make your business more profitable while also reducing your environmental impact.
By implementing the right inventory optimization solutions and following these best practices, you can:
- Reduce inventory costs by up to 10%
- Improve cash flow significantly
- Cut down on waste and your environmental impact
- Build a more resilient supply chain
The technology is there. The best practices are proven. The only question is — when are you starting?
Don’t wait until you have a warehouse full of dead inventory or suffer stockouts that will force you to panic and take reactive measures.
Take control of your inventory management today and you will see how it transforms your entire business.
Because at the end of the day, sustainable inventory optimization is not only good for the planet. It’s also essential for profitability and growth in modern business.
