Lean Inventory Management

5 Practical Ways to Incorporate Lean Inventory Management Best Practices


Managing inventory is often more expensive than it used to be — and prices for everything from shipping to storage are on track to increase steadily in the near term. Lean inventory management principles can help businesses eliminate waste, improve productivity and minimize the cost of managing inventory.

Implementing abstract principles can be a challenge, however. These practical process improvements show how any business can incorporate lean inventory management techniques into day-to-day business operations.

1.   Count Inventory Effectively

Inaccurate inventory records can be a major source of waste. Without knowing how much stock you have on hand or which products your business has in storage, it’s impossible to manage business inventory effectively.

The proper inventory counting method and an effective inventory system that reduces inventory errors can help any business develop and maintain accurate inventory counts. Effective counting systems can also accelerate inventory counting, potentially freeing up workers for other tasks.

For example, cycle counting is an inventory control method that allows a business to continuously count small samples of its overall inventory rather than the entire stock at once. In practice, the process is an excellent way to improve inventory counts’ accuracy while streamlining inventory counting.

Combining cycle counting with an ERP system and inventory barcodes can help businesses develop a highly accurate and efficient inventory counting system. This system can reduce errors while accelerating inventory counts.

2.   Forecast Demand

Both stockouts and unnecessary overstocking can create large problems for any business. Effectively forecasting demand is necessary for lean inventory management. By predicting essential changes, the company can more effectively adjust its inventory to prepare for the future.

Various strategies for demand forecasting exist, depending on the information a business has on hand.

For example, an organization can manually review or analyze the historical demand data for each product in its inventory, looking for trends. Some products may have very consistent levels of demand, while others may fluctuate significantly or with seasonal trends.

A company can also use demand forecasting and planning software. The right tool will make it much easier to identify trends in product demand quickly, determine how much product the business should keep in stock and avoid stock-outs.

3.   Prioritize Consistency and Smooth Workflows

Consistent workflows can help minimize errors and ensure inventory management operations are as smooth and efficient as possible.

Inventory management that leads to dramatic fluctuations in labor needs or production can create stress and confusion. These changes make errors more likely and productivity harder to manage.

Suppose a business regularly changes its product mix or the inventory levels of a specific product in response to unforeseen demand shifts. In that case, there may be confusion at every level of the business — from managers to employees performing inventory counts.

Consistent production workflows and demand forecasting often help to ensure consistent inventory workflows. Tools and technology that help to make lean manufacturing or production easier for a business may also simplify lean inventory management as a result.

With greater consistency, all business employees will have a better idea of what to expect from day-to-day work, reducing stress and confusion.

Changes to inventory management workflows or storage equipment can help simplify managing stock. For example, a business that uses horizontal carousels may switch to vertical to take advantage of the benefits of the vertical carousel system — like greater space-saving.

4.   Invest in Employee Development

Lean management guides often emphasize the importance of employee development to the integration of lean principles.

Empowered employees are often happier, more productive and more involved in the continuous improvement of the workplace. They may be more likely to identify process inefficiencies and notify management, helping the business continuously improve inventory management processes.

The ideal worker in a lean organization is involved in decision-making and feels accountable for the company and its processes. Lean training, benefits and compensation can all help workers feel empowered to improve their workplace.

5.   Adapt the Company’s Product Mix

Analysis of each product your business has in storage — including product margins, sales and sales trends — can help your team identify slow-moving products or materials.

You may be able to return these items to your suppliers or vendors, helping to minimize the average time in inventory for the products your business stores while also reducing overall storage costs.

The ideal lean product mix is broad enough to meet customer needs without compromising when it comes to waste. Prioritizing high-margin, fast-moving products while keeping an eye on demand patterns that may require changes to the product mix — like seasonal demand spikes — can help a business improve its inventory.

How Any Business Can Integrate Lean Inventory Management Principles

Supply chain disruptions and rising storage costs have made effective inventory management more crucial than ever.

The implementation of lean principles can help a business reduce inventory inefficiencies, increase worker engagement and minimize inventory error.

Forecasting demand tools, modern inventory counting strategies and employee development are all examples of how businesses can implement lean principles into day-to-day inventory management operations.

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