What Is Inventory Waste?

Getting the most out of your inventory is the goal of any professional, but knowing how to eliminate inventory waste is something most people aren’t aware of. If you aren’t careful, inventory waste can harm your company’s growth and seriously affect your profit margins.

Navigating inventory waste is a constant issue for many businesses – but while waste in inventory is a troubling problem, it’s completely preventable if you know the right ways to reduce it. But what is inventory waste in lean manufacturing, how does it affect your business, and how can you reduce it? Read more to find out.

What is Inventory Waste?

Lean inventory waste is considered one of the main types of waste in lean manufacturing. Inventory waste describes the inventory you have left over that remains untouched, causing lost revenue because of unsold inventory. An inventory waste example might include:

• Excess inventory
• Storage waste
• Wasted payroll costs
• Wasted capital because of holding inventory
• Waste of transporting goods

Why is excess inventory considered waste? Beyond wasting space, inventory waste costs you money because it ties up capital.

How Does Inventory Waste Impact Businesses?

Waste in inventory impacts businesses in several ways, causing serious financial strife for your organization. Below are some of the main problems inventory waste can present for your company.

Inventory Waste Slows Your Company’s Growth

Inventory waste seriously hinders your company’s overall growth and profitability. This type of waste significantly limits your capital availability and causes inefficiencies during the production process – meaning you’ll experience problems throughout the entire supply chain.

Inventory Waste Has Hefty Storage Costs

Inventory waste is expensive in more ways than one, and storage costs are only the tip of the iceberg. Having excess inventory means you need more storage space, and maintenance costs for warehouse space add up quickly.

Inventory Waste Causes Profit Losses

The high costs associated with inventory waste are one of the main reasons why inventory waste management is critical. Inventory waste incurs additional costs because of storage requirements and generates significant profit losses for several reasons.

When your organization carries excess inventory, it ties up essential capital that could be used for the company's betterment. When your products lose market demand, your business might be forced to sell them at discount prices, which can massively impact your profit margins.

How You Can Reduce Inventory Waste

Inventory waste in lean manufacturing is a big issue for many businesses. Luckily, there are several ways to reduce inventory waste and improve your company’s financial performance. Consider the following to determine how to eliminate inventory waste in your business.

Consider Just-in-Time Manufacturing

The first change to start reducing inventory waste is learning to obtain raw materials only as necessary through just-in-time manufacturing. Just-in-time inventory is an inventory management method where suppliers receive products on an as-needed basis, compared to traditional processes where organizations stock up on products in advance.

Receiving raw materials in specific quantities to fulfill the orders needed exactly can eliminate your inventory waste, making just-in-time inventory a viable solution for many businesses. The goal of this method is to meet the demand minimum without exceeding this minimum.

Automate Your Replenishment System

Automating your inventory replenishment system is another vital way of reducing inventory waste. Inventory replenishment replenishes your stock when it gets low, and more goods are required to sustain the inventory.

Preventing inventory waste is possible by automating this system to prevent stockouts. Software for stock replenishment also monitors stock levels. It notifies you of shortages to help you manage your production pipeline efficiently with the right amount of inventory rather than excessive amounts.

Optimize Storage

Optimizing the storage process is critical to reshaping your inventory management system and reducing inventory waste. Keeping your storage organized and secured and having concrete storage practices to streamline the storage process is necessary for any inventory waste reduction strategy.

Protecting your storage spaces is also critical in inventory waste because it helps prevent your stock from getting lost, stolen, or otherwise damaged. Maximizing your warehouse will help you maintain inventory for a more efficient warehouse environment and better space utilization.

Implement Demand Forecasting

Demand forecasting is one of the most important ways to reduce inventory waste and involves the systematic and methodical process of predicting a product’s future demand for a specific period. Through various techniques, demand forecasting allows you to anticipate the volume of products that your customers will purchase.

Predicting customer demand is a useful way of reducing waste because it helps you align with your actual needs rather than having you guess the inventory you’ll need and wind up with excess amounts.

Use Inventory Counting Solutions

Incorrectly counting your inventory can cause significant problems and lead to excess products that waste financial resources. An efficient inventory management system uses counting solutions to reduce stockouts, lower inventory carrying costs, and boost customer satisfaction.

Inventory counting solutions like ours are essential resources for organizations looking to reduce inventory waste through accurate inventory counting and management. Our tool allows you to measure your inventory efficiently to ensure you have the right amount and prevent you from ordering more of a product you have plenty of already.

Track Your Inventory

One of the simplest ways to prevent inventory waste is by frequently tracking your inventory. Knowing the amount of inventory you have and where your inventory is located will make avoiding issues like understocking, overstocking, and lost inventory easier.

Various options are available for tracking your inventory, including inventory management software, barcode scanners, and RFID tags. A simplified solution to track inventory will eliminate the need to make restocking a guessing game.

Optimize Inventory Counting With Zupan

When you waste inventory, you waste financial resources. A guaranteed inventory counting solution is critical to any professional environment. Inventory waste accounting processes are only the beginning of a larger inventory management process. For efficient inventory management from start to finish, you need solutions like our inventory counting software.

Zupan provides a comprehensive inventory counting solution that makes keeping track of your inventory simpler than ever before. Contact us today to start counting your inventory in no time.