10 Inventory Must Do’s for Small to Medium-Sized Manufacturers



Cash is king for manufacturers – from the owner down to the machine operators.

If you visit any manufacturer, you will see most have a keen eye on how everything is being used. Machines are generally only running if they are making parts; employees are typically only working if orders are coming in; and scrap is examined carefully to determine “How did this happen? How can we prevent it from happening again? What else can we do with this?”

Even the best manufacturing owners make mistakes.

But rarely, do they make the same mistake twice. If you ask them what some of their biggest mistakes have been, they are often tied to how their inventory was managed. Meaning that was in the past and today they are doing something different. 

What is different?

After speaking with many manufacturing owners and subject matter experts, the “different” is their business is choosing to live and die by the following 10 inventory must do’s with the help of Global Shop Solutions ERP software.

  1. Clear Out the Inventory Garbage.

What does this mean? It means you must process your inventory correctly and consistently with no exceptions.

Your inventory processes should be documented, and employees trained, retrained, and trained some more; and you should have absolute consistency in your product lines, units of measure, etc. Documenting your process also means knowing explicitly who owns what including inventory master, inventory costing and inventory quantity. Everyone should know what they are doing, when, why, and the consequences of it being done incorrectly.

  1. Regulate Your Inventory Counts.

Physical inventory or cycle counts should always be performed on a regular basis and produce exact numbers. 

By implementing regular inventory counts, this allows you to consistently ensure inventory accuracy throughout the year. We’ve found that our customers complete this in one of two ways.

    1. The first being they cycle count daily or weekly, which means they count parts based on usage or dollar amount to verify their inventory is correct.
    2. The second way our customers regulate inventory is by doing physical inventory, which calls for shutting down the shop floor and counting the inventory one weekend a year, sometimes two. 
  1. Evaluate Unused Inventory.

Just like clutter in your home, obsolete inventory or low turn inventory should be evaluated on a regular basis, not just once a year.

Inventory takes up space and space is money. If something is taking up space and not moving, that is taking away an opportunity for something that you could be selling and bringing in more revenue for your company.

  1. Know Your Business’ Trends.

Keeping your inventory labeled is an important step in controlling your inventory between physical inventories. 

Reorder, lead time, and order quantity should be reasonably correct and should be evaluated on a regular basis (and again, this doesn’t mean once a year). You know your business better than anyone and knowing when spikes occur throughout the year allows you to better plan on seasonal changes in your inventory. 

  1. Research Your Vendor’s Competition.

Your vendors win when you get lazy. So it’s okay to pick-up those pesky sales calls every once in a while.

Listen to the vendor’s sales pitch and what they have to offer as far as pricing and quality rating. You may be surprised by what they have to offer. If you stick with the same vendor year after year, you may not receive the best bang for your buck. 

  1. Automate As Much As Possible.

If job costing is a full-time job, then you probably have inventory issues.

By automating with Global Shop Solutions’ Job Costing Accounting application, you can spend less time worrying about what your finished goods cost and more time on creating a quality product. Good job costing leads to accurate inventory cost and quantity, providing you with an opportunity to automate part or all of this process ever year.

  1. Record Your Inventory Flow.

As inventory is consumed or shipped, it needs to be recorded. Some of our customers manage this process with one person, a team of people, or they let their machinist move the parts. It’s entirely up to you, and you can decide who manages that process based on how skilled your employees are and the type of material.

  1. Listen To Your Business With ERP.

Hearing is the act of perceiving sound, but listening is something you choose to do. Move beyond “hearing” with your fully integrated ERP system with MRP functionality and “listen.” Manufacturers that are using an ERP system correctly are faster, smarter, and more profitable than those who don’t. It isn’t a question; it is truth, and we have 150+ case studies to prove it.

  1. Correct Employee Mistakes Immediately.

In manufacturing, loose lips don’t sink ships. They save them. Employee attitude and participation is the icing on the cake, and if an employee or machine isn’t doing something correctly, don’t let the ship sink.

Honesty is the best policy when it comes to business, especially with money being involved. By addressing inventory mistakes early on, you reduce the risk of losing money, inventory and production time. 

  1. Always Ask Questions.

Don’t guess how to do it – ask someone. There are unlimited resources available to you at Global Shop Solutions. If you’re a customer connect with your Customer Success Manager, schedule a Virtual Training with a member of our Consulting department, or attend one of our 110+ training events a year.

If you’re in the market for ERP software, see the software for yourself. We can connect you to some great customers if you have any questions. Don’t let the fear of asking a “dumb” question keep you from managing your inventory the correct way and making money for your business.

To learn more about the 10 inventory must do’s for small to medium-sized manufacturers, download the complete whitepaper or call Global Shop Solutions at +61-2-8074-3460.

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