Inventory costs can hurt the ROI in a supply chain. Fortunately, there are some ways that companies can reduce inventory costs to make their supply chains more profitable. These solutions are relatively simple, so companies can implement them immediately.
Reduce Holding Costs
Inventory holding costs can cut into your ROI. You can reduce holding costs by improving space utilization. That might mean you need to change the layout of your warehouse to get more space. For instance, you can reduce the space between aisles. Then, you can get narrow aisle reach trucks so you can still access the inventory.
You should also remove products that you do not need from your warehouse. Warehouses often become storage units for companies, and that should never be the case. If you do not plan on selling the item, get rid of it. Then, fill that empty space with something that you will sell quickly.
Use supply chain management software to keep an eye on your inventory at all locations. Then, if a location needs additional supplies that another warehouse has, transfer those items. Then, the warehouse will be restocked without having to pay for the inventory. You will have to pay for shipping costs, but you should be able to keep those costs to a minimum.
This will save money and it will ensure that you only order items when needed. This will make your supply chain much more affordable and efficient.
Vertical integration can reduce inventory costs dramatically. This is especially true in the oil and gas industry. The oil and gas industry uses a lot of materials and equipment for exploration and production. If they rely on outside companies to furnish those materials and equipment, they have to o deal with supply and demand issues, along with high costs. Companies can use vertical integration to make the materials and equipment they need in-house. This will cut down on their inventory costs, and it can boost profits if they decide to sell the products to other companies as well.
These tips will help you cut inventory costs. Effective supply chain management software can help you cut costs even further so your entire supply chain can be lean and mean, which means it will be much more profitable. Simply integrate your supply chain system so all trading partners can access information and then work to reduce your costs. You will be amazed by how simple the process is once everything is integrated.