How you manage your inventory will directly impact the cash flow of your business. When you fail to effectively manage stock, you’re putting your business at a disadvantage. You wouldn’t typically aim to tie up too much cash in your stock room, but you equally don’t want to run out, either.
The correlation between inventory control and cash flow is largely determined by the levels of inventory stock you hold, your inventory turnover and your choice of inventory accounting method. This can be overwhelming, but it can be considerably easier with the right software – and it can benefit multiple areas within the business.
What is reduced inventory?
Inventory reduction is the process of lowering inventory levels to a point where they meet customer demand. Reduction of inventory manually or by the SKU number is necessary to eliminate excess products, free up warehouse space, save money, and increase profits. SKU rationalisation is also one of the most effective cost-reduction strategies in inventory management.
What causes excess inventory?
Many businesses have encountered issues with excess inventory. There are many causes from a lack of warehouse organisation, incorrect demand forecasting, and poor inventory control. Staying on top of inventory levels and calculating the optimal reorder point is key to avoiding this issue.
How software can help with inventory reduction
While there isn’t just one simple formula for inventory reduction, there are a couple of calculations that can help determine what inventory level you maintain. To do this, you need to calculate your inventory turnover ratio using an inventory turnover formula. It’s a valuable metric that can help you understand what products have the most demand and where you should be investing your time and money. Next, you’d need to figure out the economic order quantity (EOQ) for your products. That is, the optimal amount of a product you should keep on hand to meet demand without having to store any excess inventory. It might seem overwhelming, which is why it’s best to find the most effective software tool that can handle this for you.
Choosing the right cash flow management software
Opcenter APS is a family of production planning and scheduling software products that improve the synchronisation of your manufacturing processes, giving you greater visibility and control to increase utilisation and on-time delivery, while reducing inventory levels and waste. Opcenter APS is a highly customisable capacity planning and scheduling package.
Kudos Solutions implementations of Opcenter APS products are designed to work alongside and facilitate, rather than replace existing systems. Opcenter APS has been successfully integrated with many major ERP systems including SAP, BPCA, AS400 plus many bespoke and in-house programmed systems running on platforms such as MS Access, MS Excel, and SQL Server.
What are the benefits of software for inventory?
- Better planning internally.
- Less wasted materials and reduced wastage in general.
- Accurate intel for the sales team so they know what’s available and ready to ship at any given time.
- Inventory is managed weeks and months in advance, letting you know when to order more stock, which leads to better overall cash flow and leaner manufacturing.
- Up-to-date sales reports, demand data, supplier lead times and shipping schedules help you calculate buffer stock if an emergency arises, or units of stock prove defective.
What are the benefits of software for your business?
- 15-20% improvement in productivity, allowing you to get more from what you already have.
- 40-50% reduction in raw materials.
- 40-50% reduction in make-span time, reducing WIP that slows down production flow.
- 50-90% improvement in customer service, especially through an increase in on-time deliveries.
These benefits can provide a ROI in months or just a few weeks.
Want to implement planning and scheduling software that will benefit your business? Contact us today.
