7 Essential Strategies for Smarter Inventory Management in Manufacturing and Distribution

Manufacturers and distributors today are more focused than ever on streamlining operations and reducing costs. A McKinsey report highlighted that companies with advanced supply chain capabilities can achieve 15-20% cost reductions, underscoring the significant impact that effective supply chain management can have on overall operational efficiency.

With increasing pressures on supply chains and rising customer expectations, efficiency in inventory management has become a critical priority. Many manufacturers and distributors are turning to solutions that automate repetitive tasks, improve visibility, and reduce risk — without necessarily requiring a significant upfront investment.

One area that can yield impactful results is inventory management. While advancements in technology offer opportunities to improve, manual processes and low visibility still create risks, including inaccurate counts, stockouts, and inefficient scheduling, all hindering productivity.

If you’re evaluating your inventory management strategy, here are seven high-impact moves to enhance efficiency. These interconnected actions can be phased in according to budget and business goals, ensuring maximum return on investment.

1. Centralize with Inventory Management Software

A centralized system for inventory data and processes is the foundation of an effective inventory strategy. Integration with a cloud-based Enterprise Resource Planning (ERP) system is essential for accurate, real-time visibility. This software centralizes inventory information, connects with other systems, and facilitates seamless data flow across departments.

With a cloud ERP, you can:

• Implement in stages, adding capabilities over time based on budget
• Avoid high upfront costs through subscription options
• Scale solutions as your business needs grow
• Significantly reduce inefficiencies, especially if you’re managing multiple locations or large inventory volumes

By integrating warehouse management software (WMS), you can track inventory in real-time, minimize stock discrepancies, and optimize production scheduling. This integration is particularly useful for balancing what’s physically on the shelves with what’s recorded in the system, reducing stockouts, backorders, and excess inventory.

2. Streamline Counting Processes

Improving how you count inventory is a quick way to enhance accuracy. While some organizations rely on traditional periodic counts, incorporating mobile technology and WMS software can provide real-time updates on inventory levels. By moving away from manual processes and using tools like barcode scanners and mobile devices, you can more efficiently track inventory movement and availability.

Key strategies for efficient counting include:

• Conducting wall-to-wall inventory counts to verify system records against on-shelf quantities
• Regular cycle counts to maintain accuracy and reduce full-inventory audits
• Leveraging mobile scanners and barcode technology for greater accuracy without added complexity

Accurate counts are critical to preventing disruptions in production scheduling and ensuring orders are fulfilled without delays. When discrepancies are minimized, you can better manage stock levels and avoid costly shortages.

Consider this real-world example:

A foam sanitation equipment manufacturer had several significant inventory issues, including no cycle counting process, which resulted in double counting and impacted financial accuracy and landed costs.

With a new cycle counting process that aligned with their production processes and customer demand, the organization was able to ensure financial accuracy around inventory, which ultimately improved overall financial health.

3. Empower Your Workforce with Mobile Technology

Mobile technology empowers employees with real-time access to inventory data. Equipped with smartphones and tablets, employees can track inventory levels, update quantities, and process orders on the go, reducing the time and labor spent on locating and managing products.

Implementing mobile technology can also streamline your receiving process. A well-structured receiving process with mobile technology promotes more accuracy, reduces human error, and makes the process move more quickly by removing the manual nature. Inaccurate receiving can have downstream impacts by not having proper quantities of raw materials available for production.

Employees can quickly check items upon receipt, ensuring that quantities match purchase orders and that items are stored correctly.

4. Prioritize Demand Planning

Effective demand planning is essential to maintaining optimal inventory levels. Accurate forecasts help you prepare for customer demand and adjust stock levels to avoid stockouts and overstocking. By linking demand planning with ERP data, you can adjust inventory based on sales trends, seasonal fluctuations, and customer needs.

For high-value or perishable items, precise demand planning prevents waste and minimizes storage costs. Technology tools such as WMS and ERP software offer visibility into sales patterns and customer behavior, which can refine forecasting accuracy and optimize stocking levels.

5. Assess Supplier Quality and Efficiency

Supplier reliability plays a crucial role in maintaining efficient inventory. Frequent issues with supplier quality, delivery speed, or lead times can disrupt your inventory and fulfillment processes, potentially impacting customer satisfaction.

To better evaluate suppliers, establish a scorecard system that tracks key performance indicators such as on-time delivery, quality, and cost. Regularly reviewing supplier performance helps you identify reliable partners and address issues with those who may be impacting your operations.

6. Utilize Data to Identify Inefficiencies

Data analysis can reveal insights into inventory inefficiencies and potential improvements. For example, you might discover that certain products are frequently overstocked or understocked, or identify seasonal patterns that influence stocking decisions.

Regularly reconciling inventory levels with data from your ERP system ensures that recorded counts match physical inventory. Automated data collection, combined with structured reporting, helps catch discrepancies early, reducing the risk of stockouts, excessive stock, or delayed production schedules.

7. Optimize Warehouse Layout and Workflow

A well-organized warehouse layout and efficient workflows improve picking and stocking processes, reduce time spent moving products, and streamline operations from receiving to shipping.

With data from your ERP system, you can:

• Arrange frequently picked items closer to the packing area
• Group items frequently purchased together to minimize travel
• Create specific routes or stations for popular tasks to optimize employees’ time

Your receiving process is especially important for overall efficiency. By establishing a structured and consistent inbound workflow, you can prevent common issues like incorrect quantities or damaged parts, which often lead to costly backtracking and inventory adjustments.

Streamlining Inventory Management – A Smart Investment in Efficiency

Efficient inventory management involves a combination of strategic process improvements, technology adoption, and data-driven insights.

By implementing these strategies, you can reduce costs, improve stock accuracy, and enhance customer satisfaction. For the best results, adopt changes in phases and focus on areas where immediate benefits align with your long-term inventory goals.