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Supply chain inventory management tracks a product’s life cycle from raw materials to customer purchase to improve efficiency. It manages sales, manufacturing, warehousing, and shipping, reduces inventory costs, and optimizes transportation. Manufacturers, distributors, and end sellers can benefit from anticipating demand.
Supply chain inventory management is a system of tracking the life cycle of a product, from the manufacturer receiving raw materials to a customer purchasing the final product, in order to improve the efficiency of that process. The goal of supply chain inventory management is to better anticipate when raw materials need to be ordered, better manage when they are produced, and deliver freshly needed products to the final seller. Supply chain inventory management is a process of managing the following business activities: sales, manufacturing, warehousing, and shipping.
Designing a supply chain inventory management system begins with reviewing the ordering habits of the end sellers of a given product, which is the manufacturer’s sales process. As patterns emerge from a product’s sales, the manufacturer is better able to manage raw material purchasing and better plan for employee and equipment needs. Supply chain inventory management gives the manufacturer the ability to pay for raw materials as they are needed and avoid tying up funds in materials that will be sitting in a warehouse waiting to be processed. It offers the same opportunity to reduce downtime for workers and equipment.
Another goal and benefit of good supply chain management is the reduction of inventory costs. A complete product must be stored by a manufacturer before shipping to the final seller, and this process has two costs. Storage itself requires space and handling, plus there is a cost associated with a product that has been completed but not sold. By anticipating end seller demand, supply chain inventory management can help a manufacturer reduce inventory costs by completing product closer to the needed time.
Shipping or transportation costs can be similarly affected by supply chain inventory management. In the transport of a product, generally the greater the timeliness required, the greater the cost of shipment. By anticipating the demand for a product, the manufacturer is able to plan shipments better and combine shipments effectively for end sellers in the same area. Both of these activities can reduce the cost of transportation.
Supply chain inventory management uses existing data available to a manufacturer to streamline the process of manufacturing, selling, and transporting goods. The process, however, is not limited to producers. Distributors of a product who buy it from a manufacturer and sell it to an end seller can likewise benefit by anticipating demand and using that knowledge to reduce costs. End sellers can use customer demand statistics to accomplish the same thing in their purchasing process and inventory of goods to be sold.
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