Inventory optimization and the cost of warehouse operations

How does inventory optimization reduce the cost of warehouse operations?

Today’s companies, regardless of industry, face numerous challenges in supply chain management. One of the key elements of this process is warehouse inventory planning. The right inventory optimization strategy has a direct impact on a warehouse’s operating costs, and thus on a company’s bottom line. So how can optimizing inventory planning help reduce operating costs? In today’s coffee, we take a look at how modern approaches to inventory management can translate into greater efficiency and savings.

How does optimization reduce warehouse costs?

1. Reduce storage costs

One of the largest costs associated with warehouse management is storage costs, such as renting warehouse space, maintaining proper conditions (e.g., air conditioning in refrigerated warehouses), etc. Optimizing inventory to reduce excess inventory reduces storage space and associated operating costs.

2. Reduce losses from expired or obsolete inventory

Obsolete or out-of-date inventory is a problem faced by many companies, especially those in the food, pharmaceutical or electronics industries. Overstocking increases the risk that some goods will become unusable before they are sold. Precise planning of inventory deliveries and releases minimizes this risk, which means less financial loss.

3. Lower labor costs

In warehouses where inventory levels are optimized, the workload on warehouse staff is also reduced. With process automation and better planning, warehousemen spend less time managing excess product quantities. This also means fewer human errors related to improper inventory handling, which reduces losses.

4. Optimization of logistics costs

Inventory planning is closely linked to transportation and logistics costs. The introduction of methodologies such as “just-in-time” allows for better management of the transportation of goods. Instead of stockpiling inventory in a warehouse, goods are delivered in the right quantities and at the right time, reducing the costs associated with multiple deliveries or carrying excessive quantities of goods.

5. Better working capital management

Optimizing inventory also improves a company’s liquidity. Holding excess inventory means frozen capital that could be used for other purposes, such as investing in company growth or innovation. Through better inventory management, a company can use its financial resources more efficiently, which in turn translates into higher profitability.

Summary

Optimizing inventory planning is a key component of supply chain management, which directly affects the reduction of the cost of warehouse operations. With the help of modern technology and advanced management methods, companies can reduce storage costs, reduce the risk of out-of-date goods, and make better use of human and capital resources. As a result, inventory optimization not only reduces operating costs, but also improves the overall efficiency of the company, enabling it to better compete in the market.

DATURE ENTERPRISE software uses artificial intelligence and machine learning in the process of demand forecasting and inventory optimization. The Dature system allows the collection of cost information in the supply chain and its application to calculate optimal inventory control parameters using a mathematical objective function with constraints. This makes it possible to ensure the required availability of goods at the lowest possible total supply chain cost.

The system provides methods for forecasting seasonal demand and demand influenced by calendar days. Inventory management methods allow for both pre-season inventory building approaches, dynamic safety stock control and JIT.

TheDATURE application ENTERPRISE can also use expertise in the demand forecasting process. Authorized users can enter expert forecasts and adjust statistical forecasts with them. The process is fully auditable in terms of who changed the forecast when and how. This makes it possible to track the accuracy of both statistical and expert forecasts. As a result, the organization learns how to forecast more accurately and improve process efficiency.