What is Lean Inventory Management?

Inventory is an important asset for a business. However, this asset can be costly if not moved quickly. In fact, holding inventory can cost you a whopping 25-30% more than its unit value. These costs can include taxes, storage, damage, theft etc. But not your Opportunity Cost, which is another 15% or more. In today’s competitive scenario, it might just make sense for your business to adopt lean inventory practices.


Lean inventory management is exactly what you think it is! The idea is to eliminate waste from your inventory. Waste in the form of costs, time and effort you require to manage it.  Having too much inventory is obviously harmful to your business. But, so can be going too lean on it. Hence, it becomes important to find the right balance of inventory you should keep compared to the demand and supply.


There are various benefits to adopting a lean system of inventory management:

  1. Cost Reduction: First and foremost, lean inventory management will help you reduce waste and drive down your costs.
  2. Fulfillment Time: You will be able to speed up your order fulfillment time and improve customer service.
  3. Stock Turnover: High inventory turnover implies good business health to management.
  4. Cash Flow: With less capital tied up in your inventory levels, you have freedom to invest or pursue other business projects.


Here are some strategies you can use to implement Lean Inventory Management.

Inventory forecast
The first step to forecast for a lean inventory is to gather information. You should know the number of items stocked in your inventory, the type of items, their lead time, and turnover ratio. Collect all the historical data in one place to analyze and interpret results. Forecasting which items need to be stocked more frequently and when to order certain goods will eliminate waste and avoid stock outs.

Having Vendor Managed Inventory can also relieve you of the tensions of your goods. Under VMI, your vendor reviews your inventory, stocks it, and places any order for replenishment as needed. You can avoid over-stocking and increase your inventory turnover. Ultimately, your inventory holding costs go down and this positively impacts your profits.

For lean inventory management, you have to rely on both your suppliers and employees. It is in your favor to collaborate by making your supply chain more visible. Giving access to your inventory system in real time can help both parties to use the information and set minimum, maximum, and re-order points. Setting an automatic replan system can further streamline your efficiency.

In conclusion, having a lean inventory management does not mean to keep zero stock, rather to adapt and scale so that you quickly respond to the market demand. Click here to learn more about how Clear Spider can help you improve your inventory management.

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