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Inventory management: definition & important aspects for buyers
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Inventory management in a nutshell:
Inventory management comprises the systematic planning, control and monitoring of all material stocks along the supply chain. For purchasing, it is an essential tool for optimizing capital commitment while at the same time ensuring security of supply.
Example: By introducing an ABC-XYZ-controlled inventory management system, an automotive supplier reduces its average inventory holding from 45 to 28 days and thus reduces its capital commitment by 2.3 million euros per year while maintaining a delivery capability of 98%.
Contents
What is inventory management?
Inventory management refers to the planning, management and control of stock levels within a company. The aim is to hold the optimum quantity of goods and materials to ensure smooth production and delivery. The aim is to avoid both overstocking and shortages. Efficient inventory management minimizes storage costs and maximizes delivery capability by adjusting stock levels to actual demand.
Core elements of inventory management
Significance for purchasing
Inventory management plays a central role in purchasing, as it has a direct impact on security of supply and profitability. Effective inventory management enables purchasing to avoid supply bottlenecks, reduce capital commitment and increase the satisfaction of customers and internal departments. It enables more precise planning and improves the negotiating position with suppliers through well-founded demand analyses.
Inventory management: from traditional warehousing to smart inventory management
Inventory management is essential for ensuring efficient processes in companies by providing the optimum quantity of goods and materials at the right time. Building on the theoretical basis, it is crucial in practice to ensure security of supply while minimizing costs and capital commitment. Traditional methods reach their limits as they are often inflexible and cannot react quickly enough to market changes. There is therefore a need to switch to modern, digital approaches in order to meet the increasing requirements.
Old: Traditional warehousing
Traditional approach: In traditional warehousing, stocks are often managed manually or using simple software. Order quantities are usually based on rigid minimum stock levels and fixed order points, without taking current market data or changes in demand into account. Tools such as Excel spreadsheets or simple warehouse management systems are used. This method is characterized by high stock levels in order to avoid supply bottlenecks, but this leads to high inventory and capital commitment costs. There is also a lack of transparency in real time, which leads to inefficient processes and weak reactions to fluctuations in demand.
New: Smart Inventory Management
Smart inventory management: The modern implementation of inventory management uses digital technologies such as IoT, big data and artificial intelligence. Real-time data analysis and networked systems enable companies to manage their stocks precisely. Automated demand analysis takes current sales figures, seasonal trends and external factors into account. Innovative tools enable a dynamic ordering policy that adapts flexibly to market changes. Practical benefits include a reduction in storage costs of up to 30%, improved delivery capability and a reduction in capital commitment. Integrating suppliers into digital platforms makes the entire supply chain more efficient and transparent.
Practical example: Automotive industry
A leading company in the automotive industry implemented a smart inventory management system that reduced stock levels by 25% and tied up capital by €15 million. With the help of real-time data and AI-supported forecasts, inventory accuracy was increased to 98%. Delivery readiness increased to 99%, while storage costs fell by 20%. These measures not only improved the company's efficiency, but also enabled it to react more quickly to market changes and strengthen its competitiveness in the long term.
Conclusion on inventory management
Effective inventory management is essential for a company's success. It not only optimizes stock levels and minimizes costs, but also ensures competitiveness through improved delivery readiness. The integration of modern technologies such as AI and predictive analytics enables more precise demand planning and automated processes. The continuous digitalization of inventory management and close coordination with suppliers are crucial for the future in order to be able to react flexibly to market changes.
