A growing trend within the manufacturing sector is lean inventory management. This management style can benefit all manufacturers, though it can have the most significant impact on smaller and financially limited organisations.
In this post, we’re going to explore the fundamentals, benefits, and practices within lean management that have led to its widespread adoption.
What is lean inventory management?
Lean inventory management is a process that aims to reduce waste and overhead within manufacturing. Typically, manufacturers shoot for a proactive approach to managing their inventory. The goal in this paradigm is to be prepared for disruption by having safe stocks, excess items, and extra storage space.
The problem is that this can lead to unmoved inventory, growing deadstock, and excessive warehousing overhead.
Lean management takes the opposite approach. Its goal is to only order products as you need them, thereby using as little space, materials, and transportation resources as necessary.
The core principles of lean inventory management
A few core principles make up the foundation of the lean management process. Below is a quick explanation of each to help you better understand how a lean approach can reshape your business’s strategy.
What value does lean inventory management bring to your business
First, it’s essential to recognise that lean inventory management involves restructuring your approach from top to bottom. Your entire strategy will need to adapt to implement a lean strategy.
For that reason, you must consider the value proposition lean management has for your business and customers. Does your business need this type of approach? If so, why? What benefits are you hoping to gain? By outlining your goals ahead of time, you can ensure your business’s adoption of lean inventory management meets your needs.
Understand your warehouse’s inventory flow
The second tenet of lean inventory management is developing a deep understanding of your warehouse’s inventory flow. To manage a lean process successfully, you need to have your finger on the pulse of your inventory movement.
This is something that software can help with. You can automate your inventory tracking and get real-time insights into your stock quantities, status, and location.
Reducing your pulls
The third principle of lean management is one of the most important: reducing your new stock pulls.
As mentioned, many manufacturers aim to use a proactive approach, anticipating demand and having enough in stock for that demand.
This is not how the lean approach works. Instead, you’re only going to order new stock when a customer places an order. Your stock levels should rarely change, nor should they ever become too excessive.
Develop a reactive and precise methodology
Lastly, your business will need to embrace reactivity and precision. You won’t be stocking as much safety stock as you’re used to or preparing for incoming orders ahead of time.
Without precision or high reactivity, this can end in disappointed customers and lost revenue. Your business will need to be actively engaged in your inventory management at all times. You’ll also need to keep a close watch over potential disruptions to your supply chain, as you’ll have fewer tools to manage issues when they occur.
The benefits of lean inventory management
Although a lean management style can be challenging to embrace, it provides benefits critical to manufacturers at various levels and in multiple positions. Here are some of the benefits that come from adopting lean inventory management.
Relying on a lean management strategy can quickly cut various costs.
Lean management cuts down on the amount of product you’re ordering. This prevents dead stock and overstocking, which can amount to a significant percentage of your current overhead.
And by ordering less product you’ll also be storing less product. And the fewer of each item you’re holding, the more kinds of things you can hold while spending less per item.
Ordering fewer items also has the benefit of being eco-friendly. This cuts down on waste materials that may never sell.
It also reduces your transportation needs, keeping your carbon footprint lower as well.
Sustainability is a chief concern for businesses and consumers alike in today’s marketplace. You can not only use lean management for advertising these values but also enacting them.
Finally, lean businesses can generally develop products faster. That’s because you have fewer items to sort through, less overhead, and overall faster operations.
With companies like Amazon increasing the expectations on shipping times, it’s crucial for businesses that want to compete to offer a fast and convenient shipping experience. A lean management approach can help you achieve this.
4 tips for implementing lean inventory management in your agriculture business
For agriculture businesses considering implementing a lean inventory management system, you can follow some best practices to boost your chances of success and maximise returns.
Consider how to reduce non-value-added time
Everything your agriculture business does should add value. But as so many in the agricultural world know, it’s hard to make every action a value-add. If, for example, you’re travelling long distances during harvests, that travel time isn’t adding value to your business or customers. You can use the concept of lean management to find ways to reduce unnecessary travel time and make harvests more efficient.
Look for opportunities to cut down, not just on wasted inventory, but on wasted time and effort, and you’ll see better results.
Maintain inventory records for forecasting and establishing minimum stock levels
Businesses should strive to maintain quality, detailed inventory records. After all, this will be the cornerstone of your operations when switching to a lean management style.
As mentioned before, automation and software can dramatically improve your record keeping. Tools like RFID tags, barcodes, and scanners can give you real-time insights into the location and status of products and materials. And cloud-connected software can provide insights, trends, metrics, and management tools whenever you need them.
Using the right tools will help you decide the bare minimum stock levels you need to maintain, and help you cut down on overstocking everything from products to crops, and even tools.
Build close relationships with suppliers and labour
Another key attribute of a successful lean inventory management implementation is people management. You’ll be relying on suppliers and labour more than ever, and it’s essential that they know the ins and outs of your lean approach.
Start with your team and any temporary staff by streamlining your training process, and putting processes in place to cut down on wasted time and effort. Standardising everything so it can be easily explained to seasonal employees helps everyone spend less time learning the job and more time doing the job.
Then focus on your suppliers. You’ll be asking for products from these suppliers more frequently and in smaller batches. And you’ll be depending on them to help you avoid and prepare for disruption.
So, work to deepen these relationships and be clear about your needs. If you notice that a particular supplier cannot meet these needs, you need to either rework or replace this relationship with a supplier who better understands the lean approach.
Keep a safety stock
While your business shouldn’t be overstocking while using a lean approach, safety stock can still be a key part of your strategy. As mentioned, one of the biggest threats to a lean inventory management system is disruption.
Having a safety stock in place can mitigate the adverse effects of disruptions on your supply chain, customers, and revenue. Keep a safety stock of your hottest products, just don’t let it grow to an excessive size.
Use an inventory management platform
You may have noticed we’ve mentioned using an inventory management platform a few times, and that’s our final tip. Using a robust order and inventory management platform will help you keep a close eye on your inventory in real-time.
With automation and sophisticated tracking, you’ll be able to know exactly when you need to order specific products. You’ll be better prepared against disruption and have the ability to keep your overhead at an absolute minimum.
Embrace a lean inventory management approach with an inventory management platform you can trust
If your business is ready to enjoy the benefits of a lean inventory management paradigm, you can reach out to Workhorse today and demo our leading inventory management platform. It’s packed with the tools you need to make your lean management style a success.