5 Ways to Reduce Inventory Waste and Improve Productivity

Having too much inventory waste can be costly when it comes to your business resources and time. Inventory is tied up to the capital and if you are not effectively managing it, you will notice how fast it absorbs cash flow or hide inefficiencies within your organization. It’s important to install the right inventory control processes in place to reduce your inventory waste.

However, before you start reducing waste, you need to understand why it happens. Based on the principles behind lean manufacturing, there are 5 areas of inventory waste where companies can effectively reduce inventory waste and thereby improve productivity and increase profits.

Inventory management

A disciplined quality control process ensures effective returns management, helping toward both commercial and sustainability objectives.

1. Overproduction

If you produce too much stock in advance, you will incur high costs of holding inventory. On the other hand, you will have a lot of stock that you are unable to sell. You can avoid overproduction by manufacturing things as quickly as the customer demands.

This type of inventory production allows you to hold the minimum stock required to keep your business afloat. You will be able to order what you need for your immediate needs and avoid overproduction by producing what you need, only when it is needed. Accurate forecasting will also help with your manufacturing decisions.

2. Delays

Delays are often referred to as the waste of waiting. They often increase production costs and may occur due to the inefficiencies of late delivery of supplies, processing bottlenecks, or information. Manufacturing bottlenecks may adversely affect your whole processing chain. Whether your employees are waiting for a delivery of raw materials, a machine to be fixed or a previous task to be completed, sitting idly will be a huge cost to the business.

Well, you can mitigate these delays by automating your entire inventory replenishment process through the use of smart software solutions to ensure timely deliveries. Additionally, you can optimize other areas of your business such as the warehousing processes to manage production flow and overall efficiency.

3. Inventory Defects

Defects may happen due to poor design and equipment, as well as lack of operator training or the use of non-standard procedures. Numerous costs are associated with inventory defects such as reworking, problem-solving, extended lead times, rescheduling, delivery fails, and unhappy customers whose needs have not been met.

Well, you can reduce inventory waste by reducing the total raw materials, work in progress, and finished goods. If you have a lean stock in hand, you can recognize and rectify defects easily when they occur. You need to invest in modern equipment and the right type of software to keep your business competitive as you maintain consistent quality thereby reducing waste.

Wasted resources in a warehouse
photo credit: nSeika / Flickr

4. Over-processing

Yes, doing more than the customers asks is a great way to improve customer loyalty. However, it may quickly lead to inventory waste. If whatever strategy you implement doesn’t boost function, speed, and appearance in marketing a product, then it qualifies as inventory waste. Note that, over-processing may also include double-handling and excessive packaging of a product.

You need to review every step in your operations to identify where you can reduce waste effectively. You must eliminate every process your inventory goes through that may not change the value.

5. Transportation

Most transport waste can be attributed to the overproduction of inventory. It increases the need for moving stock from one functional area to another, manual handling, and transportation of inventory between stores and factories.

Excessive handling and transportation increase the chance of loss or damage. On the other hand, every moment your trucks are loaded but not moving at a loading dock, it can actually be considered an inventory waste. You can try out various reliable solutions such as expedited freight and trailer programming to keep your freight moving without any hassles and your customers will be satisfied.