Inventory Management

5 Sources of Inventory Waste (and How to Deal with it)

By September 3, 2020 November 18th, 2020 No Comments

Every single item in your inventory is a cost. Some of these, like physical costs, are obvious, while others are not, so inventory waste isn’t something you should take lightly. It can cost a lot in time and resources, as well as tying up capital. Managing inventory waste effectively can reveal inefficiencies in your process and free up much needed cash flow.

However, for you to be able to do anything about managing inventory waste, you need to know where it comes from. Here are the 5 areas most organizations should look at to identify inventory waste and a few ways they can deal with it.

  1. Inventory defects and Over-processing

Defects could stem from manufacturing processes or insufficient quality control, leading to products that need to be remade or expensive recalls. Defective products in your inventory are a huge strain on your resources, which you can reduce by reviewing your processes, SLAs with vendors and employee training. Over-processing is the opposite, where you end up doing things that aren’t needed. Reassessing your operating processes in terms of compliance vs cost and looking at cheaper alternatives can help you cut costs.

  1. Excess Inventory and Overproduction

While producing in higher volumes might seem lucrative if it’s cheaper, but you should look also take the cost of maintaining a larger inventory into account when you’re planning your production volume. Less obvious costs like stock getting damaged while it’s in inventory can add up quickly, which is why many companies have switched to Just-in-time manufacturing to cut down costs. You can also improve the way you handle goods to reduce the risk of damage.

  1. Transportation of Inventory

Overproduction often leads to transportation or movement waste in inventory. With an overstocked inventory, goods need to be moved or relocated more often. Increased transportation means there’s more manual handling, loading and unloading, which in turn increases the risk of goods getting damaged. Study the movement of goods from raw materials to finished products and align the layout of production and warehouse processes to boost efficiency.

  1. Waste Equipment and Recovery

No matter how efficient your inventory and manufacturing processes are, there will always be some materials that need to be disposed of. A lot of equipment is designed specifically to help you manage physical waste efficiently. You can install a trash chute in areas where there is high waste production to reduce manual effort. Depending on the type and volume of waste being generated, installing balers or an industrial trash compactor might be worthwhile.

  1. Inventory Management Systems

If you’re still recording inventory manually, it’s time to stop. It’s slower, less accurate and usually much more expensive in the long run. A good inventory management system does much more than maintain records; it’s a vital tool which can help you improve quality, and reduce inventory waste and shrinkage. If you’re planning on shifting to just-in-time manufacturing, it’s absolutely essential.



Author bio:

Erich Lawson is passionate about saving the environment by effective recycling. He has written a wide array of articles on how modern recycling equipment can be used by industries to reduce monthly garbage bills and increase recycling revenue. You can learn more about environment savings techniques by visiting Compactor Management Company blog.