The problem of excess inventory

The problem of excess inventory

It can be a delicate balance trying to match supply against demand. If the scales tip too far in either direction it can have detrimental results for any business.

According to a recent survey conducted by Logistics Management, the issue of supply outweighing demand is a problem that affects the majority of businesses across all industry sectors. The research found that 56.8% of companies say they have an issue with high or excess inventories. Of these companies, more than three quarters (77.9%) claim that this has been an issue for more than a year.

There are many factors which can contribute to high inventory levels, from unavoidable occurrences such as weather affecting demand to sudden shifts in consumer preferences. There are, however, methods manufacturers can utilise to try and alleviate or avoid excess stock levels.

Having an effective materials resource planning (MRP) system in place is one key means to alleviate the issues which lead to high inventories. An MRP system, such as FactoryMaster, will allow manufacturers to organise all their resources and operations by providing a much clearer view of the current levels of supply and demand.

The Logistics Management survey found that 66% of companies are now looking to increase their use of inventory visibility and demand planning tools to lessen the impact of high inventory levels and optimise the supply chain.

This is not surprising as the intelligence provided by MRP systems is helping organisation optimise the production process. By using real time data to check demand from the retailer, manufacturers can adjust materials orders and labour levels accordingly. In so doing, they can pre-empt any potential excesses or shortages.