Five Ways to Effectively Reduce Your Inventory Shortages

Accumulating stock will not help your company reduce its inventory shortages.

It may seem that the obvious solution to stock shortages is to increase your safety stock. After all, it makes sense that carrying more safety stock lowers your chances of a shortage. Unfortunately, this is far from the truth. 

Increasing safety stock is a costly way to manage your inventory. This is because you are using up your budget on stocked items. As a result, this reduces flexibility to purchase stock that you really need. Plus, you are paying the carrying costs for items you might not need. So, more safety stock could result in future inventory shortages. Excess stock can put strain on your operations. Also, this method takes away the focus on keeping inventory levels low. Thus, you may find yourself with low turnover rates and incorrect orders refilled.

Increasing your inventory levels to combat shortages is often a quick fix for a greater issue in your operations. It may seem like a logical step, but it will not solve the issue. You need to evaluate your firm’s processes and define the broken links in your supply chain.

Here are five tips you can use to help reduce your inventory shortages:

Eliminating Uncertainty

A key cause of stock shortages is uncertainty. Do you have lengthy lead times? How sure are you in your forecasting? Reducing the lead-time of your orders is an effective way to minimize your stock shortages. As you ship and receive faster, this will improve your firm’s efficiency. This increase in turnover will streamline your production. In addition, a smaller lead-time means you need less inventory on hand. As a result, this saves your firm the cost of keeping excess stock.

Forecasting the demand for your products is a key factor to reducing your stock shortages. Long lead times may drive you to use ineffective techniques, such as long range forecasting. This is a tool used to predict your future stock demand. The length of time from your forecast to your order purchase is long, which means your stock levels will be less accurate.

If your forecasting is unreliable, you will not be able to predict the stock levels that you need. Forecasting demand in the short-term will give you better precision. You have a better idea of how much stock you have one week from now, compared to one month from now. Making predictions in short-term is far more reliable. 

Inventory management

Having control over your inventory is vital to safeguard against stock outs. It is crucial to put an inventory management system in place that gives you visibility. Knowing your inventory levels, you can determine when your stock needs to be replenished and reduce inventory shortages.

Clear Spider’s system creates  purchase orders for you when you reach your set min stock level. Our system will ensure that you receive stock before you reach your safety stock. With Clear Spider, you can verify if your orders have shipped, highlight order issues, and generate reports that will help you avoid stock shortages.

Rethink your order-to-delivery

Cycle time reduction is a tool used to increase your order-to-deliver time. This tool decreases your lead-time, lot sizes, safety stock, inventory costs and set-up time. Cycle time reduction will improve your overall customer service by increasing the number of orders you deliver on time and the quality of products. You can do this by re-imaging your current processes. Discover how your company can make your cycle time more efficient while producing high-quality products.

Scheduling your production

Planning your production schedule is a factor of reducing your stock shortages that is often overlooked. This tactic ensures that there will not be any breaks in the flow of your production lines. Imbalances in your production can cause bottlenecks which will hinder your productivity and performance. It doesn’t matter how many parts you have ready for Step 3 if you’re missing parts for Part 1. Identifying and actively preventing these issues will take care of what could be causing stock shortages.

Take advantage of performance metrics

Do not forget about the value of performance metrics . Metrics can help your company improve customer experience, efficiency, profits, and overall performance. Identify which metrics you should prioritize to work on weak areas of your production cycle. Always make sure that the metrics you focus on are not enabling the stock shortages that your firm is experiencing.

You can use reports to track these metrics and stay on top of your performance. Find the weak spots in your supply chain and work to improve them.

Want to learn more about reducing Inventory Shortages? Click here to see how Clear Spider can help.