![]() ![]() We recommend you don’t go for 100% JIT at this stage.įind out what raw material stock you have lying around the longest and ask yourself, “Why does this need to be here?” Your inventory turnover ratio (IRT) should be increased by keeping less stock. You could adopt principles of just-in-time (JIT) manufacturing. Calculate how much you pay to keep each square foot of stock monthly. The perpetual inventory workflow could be a better solution for your inventory management. Most disciplines have a core set of principles to learn that will put you at the top of the game if you take the time to master them.Īre you spending too long on stocktaking, only to find mistakes still happen? Get your foundation right, and the rest will follow. And guess what? This 20% is the tried-and-tested fundamentals that go to the heart of inventory management. What’s more, 20% of the stuff you learn about managing your raw materials inventory is used for 80% of your operations. You could be working your socks off for 100 hours a week, but only 20 of those hours get the majority of your results. Have you heard of the Pareto Principle? The famous 80/20 rule is that 80% of the results you get come from 20% of the input. How much energy needs to go into raw materials inventory management Keeping these levels up to date ensures you always have just the right amount of raw material inventory in your warehouse so that you won’t have too much cash tied up. As a result, these raw materials inventory levels become inconsistent.Īll the events below should trigger an adjustment:Īlso, don’t forget to adjust safety stock and reorder point levels to account for seasonal changes like an upcoming holiday season. Manufacturers often fail to calculate raw materials used regularly. Most manufacturers employ some minimum inventory principles for raw materials used in production. Safety stock describes the inventory a business keeps in the warehouse to protect against spikes in demand or shortages in supply.Ī good reorder point ensures that your business typically does not dip below your safety stock levels. Update safety stock and reorder level points Keep everything lean and increase raw inventory management complexity only if there is a clear business need. It’s better to have something simple working well than something complex that does not work at all. Just take stock of your raw materials and finished products. Thus, if possible, start with basic raw materials inventory management and do not try to track different stages of production immediately. We strongly recommend not trying to jump to the latter immediately.Īlthough proper inventory management has great benefits, it also comes at a cost - the time and resources to keep it running and up to date. Typically, companies start with finished product inventory tracking, implement basic raw material stock management, and more complex work-in-progress management. Don’t obsess over work-in-progress inventory When you start to optimize your raw material inventory management, here are some tips and tricks to get you started on your journey. That’s why it’s important to understand your raw materials’ value and the demand from your customers.īest raw material inventory management techniques Your raw materials may not spoil like supermarket produce, but the result of keeping large amounts of raw material stock around is the same. ![]() Without a proper raw materials inventory plan in place, your will drive up your manufacturing costs for no good reason. This won’t be a small error - something like this could spell the end for your business. Stocking up to last until next Christmas could be a bad move since perishable goods could expire or cost you storage costs. ![]() Well, imagine your raw material inventory was raw produce in a supermarket. Raw material inventory management is the process you or your managers will follow to ensure enough stock on hand, from direct materials to indirect materials, to keep production moving.Īs your orders increase, you may order a ton of extra materials, assuming that the more safety stock you have, the better. ![]() Why is raw material inventory management important? ![]()
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