Now’s the Time to Reduce Inventory Levels

With the New Year here and the Christmas rush over, now is the perfect time to bring inventory levels down. According to Distribution Digest, a good way to accomplish that is to lower your level of service. While that may also sound like a good way to lower your level of business, the Digest claims it can be done without driving customers away—and that offering too much service can result in storing more inventory than needed.

The first step, they say, is to ask, “Is our planning aligned with our customers’ service expectations?” What you want to do is provide the service level customers desire—but you may actually be trying to accomplish more than your customers expect. Are you attempting to have inventory on hand for immediate shipment of every order, when your customers may actually be willing to accept shipment in a day or two? That can lead to overstocking to provide service at a level your customers don’t really need—but make sure you find out what they want before making a change.

Another approach is to reduce the number of unique stockkeeping units (SKUs) kept in inventory. If you carry different variations of the same product for multiple customers, try standardizing some of the packaging to reduce SKUs. Or, handle the customization activities in the warehouse, after the products have been picked. Your inventory levels can be reduced without damaging the customer relationship.