The need for efficient inventory management and waste reduction has become a paramount global concern in a world increasingly attuned to sustainability and its environmental consequences.
Companies across diverse industries are actively exploring innovative strategies to strike a balance between ensuring product availability and reducing excess inventory, which often results in waste.
In this feature, we explore the intricate field of inventory management, delving into the various methods and approaches organisations can employ. These techniques help optimise inventory levels and make a tangible contribution to a more sustainable future. From the integration of cutting-edge technology-driven solutions to the proactive implementation of waste reduction measures, this journey uncovers key practices that transform inventory management into a potent tool for waste minimisation.
In this week’s edition of Let’s Talk, we’ve sought insights from our experts on this crucial topic.
Rhyan Stephens, Supply Chain and Procurement Partner at McGrathNicol Advisory
“With renewed interest in inventory and its direct link to working capital outcomes, the need to manage stock investment and minimise waste is now more appreciated within operational and procurement departments than it may have been previously.
“Supply shortages, channel shifts and enhanced consumer lead time expectations have necessitated a review of inventory strategies. These techniques, when supported by improved reporting tools, may include:
- Effective sales & operations planning to promote alignment and a single dataset across sales, operations and finance teams
- Cross-functional participation in promotions and scheduled range reviews
- Various diagnostic tools such as ABC classification, economic order quantity, SKU velocity, and the opportunity cost of stockouts
- Established and consistent procedures to track material flow, supported by effective cycle counting and stocktakes
- Clear inventory KPIs and management accountability
- Ongoing training around the financial impact of inventory positions on Profit & Loss, cashflow and the balance sheet
- Accurate cost-to-serve modelling that includes consideration of holding costs or other financing (i.e. trade finance)
- Proactive management of SLOB (Slow Moving & Obsolescence)
“So despite the emergence of implied “new” trends like “Just In Case” ordering (which is really just akin to safety stock), effective inventory management will always involve a range of clear, relatively unchanged, and reliable techniques that are to be continually tested.”
Natasha Rock, Solutions Lead – IT Management and Support APAC at GoTo
“To stay afloat during the pandemic, organisations rapidly purchased a range of applications and solutions. Years on, this has created a dispersed, inefficient inventory requiring unnecessarily high expenditure to maintain and support.
“Moving forward, consolidation of technology applications and tools will provide a cost effective and productive solution for organisations. GoTo’s 2023 IT Priorities Report found 82% of Australian organisations consider consolidation of communication, collaboration, and IT management and support tools an important initiative of the year, with 92% of organisations having planned, completed, or currently in the process of their consolidating efforts.
“Consolidation helps organisations effectively manage their inventory as it allows for applications that are essential to the organisation to be run on one platform. Coupled with the addition of Asset/Inventory Management capabilities, a singular platform will also help IT admins to secure assets and act fast in case of inventory and audit, budgeting, and forecasting, in addition to benefits from seamless integrations with existing functionalities, such as ticketing, to help boost business productivity.
“Organisations and their IT teams should seek out IT solutions that address these multiple needs, to bring more ease of use for employees, reduce the burden on IT, and enhance productivity for the business, all with minimal waste.”
Jonathan Levy, Country Manager – Australia at Shopline
“To manage inventory efficiently and reduce waste in today’s sustainability-driven business landscape, retailers must focus on supply chain optimisation, sustainable operations, and reducing returns.
“Optimising the supply chain involves embracing traceability solutions which capture crucial data throughout the production process. Unified commerce and its data unification capabilities offer a single link between sales channels and your ERP (Enterprise Resource Planning) system or OMS (Order Management System). This approach enables optimised product journeys, better planning, and sharing of supplier information with customers.
“Operational efficiency is key to minimising environmental impact. Strategies include promoting click and collect, implementing advanced delivery options, leveraging stores as distribution centres, and using accurate packaging. These measures reduce waste and emissions while improving customer experiences.
“Efficient returns management is crucial. Actively working to reduce returns is key; providing rich product content and encouraging UGC helps customers make more informed buying decisions. Offering in-store returns not only reduces environmental impact but also enhances flexibility and choice for customers.
“By adopting these techniques, businesses can enhance their inventory management, align with eco-friendly consumer preferences, and contribute to a more sustainable future while minimising waste across their operations.”
Brett Newstead, Director of Sales, ANZ at Zebra Technologies
“Inventory management is critical for small to medium-sized businesses to avoid costly overstocking or excessively investing in slow moving stock leading to lost sales, warehousing challenges, or shrinkage. To do this effectively, it is crucial that businesses improve visibility of their stock levels.
“Omnichannel creates additional complexity and pressure to deliver the right inventory to the right locations further driving the need for accurate visibility of stock. An excellent solution is radio-frequency identification (RFID) tools that provide accurate real-time tracking of products across multiple channels, ensuring visibility and preventing discrepancies. Once your business understands its stock levels, the right products that generate sales can be delivered to the retail store shelves, packed for click and collect or home delivery within the customers expected timelines.
“Zebra’s research shows that customers are increasingly frustrated by out-of-stock incidents. To sustain customer retention in this competitive climate, businesses must treat stock availability as a top priority.”
Garry Valenzisi, Vice President – APAC Global Industries and Vice President & General Manager ANZ at Iron Mountain
“Waste is often an unavoidable byproduct of inventory reorganisation. But if approached correctly, small to medium businesses can lower their environmental footprint while generating commercial benefits.
“Electronic waste is the most rapidly expanding waste category on a global scale, and Australia ranks as the fifth-largest contributor to this issue worldwide. As our dependence on cutting-edge technology and devices continues to rise, there is an escalating imperative for businesses of all sizes, to adopt sustainable practices when handling obsolete electronic equipment.
“Using the waste hierarchy as a guide, SMB’s can manage their inventory in a sustainable way by:
- Reducing – Embrace digitisation as a way to proactively reduce waste, mitigate risk, lower storage costs and boost productivity. For example, Iron Mountain’s budget-friendly solutions can sort through co-mingled online documents according to personalised needs, allowing for streamlined access.
- Re-using – Ensuring that end-of-life IT assets are properly retired not only guarantees that your data is securely erased but allows valuable e-waste components to be re-sold into the market, contributing to the circular economy and generating income for your business.
- Recycling – By recycling unneeded paper documents, you can divert from landfill and save money by avoiding the costs associated with raw materials. For every 10 tons of paper shredded and recycled by Iron Mountain, an estimated 240 trees and 72,000 litres of water are saved.
“With digitalisation on the rise and sustainability at the forefront of innovation, a streamlined inventory management plan can pave the way to long-term success for small and medium businesses.”
David Ogilvie, CEO at David Ogilvie Consulting
“Inventory is the second biggest consumer of capital next to capital equipment purchases. So, it is unusual that many executives don’t focus on ensuring sound inventory management practices within their business. They are satisfied the yearly stocktake is sufficient. Yet, at the same time, they will complain the production line is not operating at full capacity, that profits are not as substantial as they would like them and that the value of the business is not at the multiple they want.
“They seem to forget these matters are closely connected.
“Sound inventory management practices will improve all those areas. What you need to make this work for you is:
- Process discipline. Set up an inventory management process and be consistent with it
- A cycle counting regime that involves counting some inventory EVERY day in EVERY site/warehouse/production facility
- An ERP system that facilitates the cycle count regime so that it is not an arduous task
- Well-defined inventory procurement settings – it is amazing how many systems contain lead time settings, as an example, that are years out of date and don’t reflect current circumstances.
“If those in your business don’t know how to do this, and if it’s not in place now, I suggest they don’t, get independent advice on how this can be done for your business. If they don’t want to … well, that’s a different issue altogether.”
Tim Brown, Vice President Global Solution Engineering at Oracle Food and Beverage
“Inventory management and food waste are major hurdles that every bar and restaurant has had to face at one time or another. Luckily, integrating a point-of-sale (POS) system with inventory and supplier management allows you to track and trace the journey of produce through to the kitchen, and can highlight what is generating the highest waste, enabling you to make fundamental changes.
“Oracle Simphony Cloud Point-of-Sale (POS) is an all-in-one platform that helps restaurateurs optimize their online and in-house operations in real time and helps minimize food and drink waste by maintaining optimal stock levels via real-time forecasting data. It optimizes order timing and helps staff prevent over-portioning, and waste. Simphony also connects with a restaurant’s vendors and suppliers, making it easier than ever to reorder, access invoices online, spot pricing trends, create menu models, and more.
“Reducing waste has far-reaching benefits for restaurant operators and the industry at large. Whether you’re pursuing a zero-waste initiative in alignment with your brand values or simplify striving for better customer experiences and margin performance, data is at the center of the equation.”
Svante Göthe, Head of Sustainability at RELEX Solutions
“Sustainability has become an increasingly important topic in today’s business world, and for a good reason. It’s not only beneficial for the environment, but it also leads to cost savings and improved efficiency.
“By aligning with the sustainability expectations of consumers and retailers, wholesale and distribution companies can forge stronger partnerships and maintain a competitive edge in the market.
“Companies that prioritise sustainability in their operations can enjoy a substantial competitive advantage, including increased profits, balanced inventory, optimised floor space, and enhanced efficiencies throughout their operations.
“The figures in the RELEX Solutions 2023 Sustainability Report represent a more than 20% increase in food waste savings over the previous year. By enabling more efficient use of customers’ transport capacity, RELEX also helped to reduce transport emissions across the supply chain through more accurate planning and optimised deliveries using their machine learning and AI capabilities?
“Alongside efforts to reduce food waste, RELEX has been developing capabilities in their software to track customers’ CO2 emissions to help them achieve their sustainability goals. Customers can see the CO2 impact of the goods flowing through the supply chain and measure the effect the reduced spoilage has on their carbon footprint.”
Roger Cook, Co-Founder of Lucent Globe
“Businesses can prioritise both efficiency and environmental sustainability by adopting streamlined approaches to inventory management. At Lucent Globe, we use predictive analytics to anticipate our sales and ensure we order only the necessary amount of stock required over a period of time. This helps not only reduce the carbon impact of shipping multiple orders, but also minimise waste and optimise use of our warehouse space. The benefits also trickle down to consumers, with our optimised ordering systems enabling cost savings to be passed onto our customers.
“Equally important is a company’s commitment to using environmentally friendly products throughout operations. We produce 100% biodegradable products and our operations also serve a testament to our dedication to sustainability. We understand the devastating impact of plastic waste on our planet, and that’s why we make a conscious decision to package our products in compostable and recyclable cardboard boxes. Unlike plastic alternatives, our packaging breaks down naturally,contributes to compost, and can be easily recycled, helping to reduce landfill waste and ocean pollution.
“Our packaging choices are not just ethical, but also practical. The use of cardboard allows for easier and more efficient stacking and storage, which in turn complements our just-in-time inventory system.”
Carl Taranto, Director at Dusk&Dawn
“Environmental responsibility is no longer an option; it’s a necessity. As consumers become increasingly aware of the impact of their choices, Australian businesses are stepping up to make a difference. At Dusk&Dawn, we’re committed to producing luxurious Australian-made mattresses that not only provide unmatched comfort but also contribute positively to our planet. One significant aspect of this commitment is managing inventory and minimizing waste.
“Importantly, our commitment to managing inventory means we make our mattresses to order, reducing the need for any stockpiling. This approach not only helps in minimizing waste but also ensures that every Dusk&Dawn mattress meets our rigorous quality standards.
“Our 100-Day Comfort Guarantee further reduces waste – when a customer requests a new mattress or a comfort adjustment, rather than sending mattresses to landfill (as many in the industry do) we offer a complimentary comfort check/ firmness adjustment, minimizing waste and reducing our environmental footprint significantly.
“We are proud that by choosing Dusk&Dawn mattress, you’re not just investing in a luxurious night’s sleep but also contributing to a greener, more sustainable future. Together, we can make a difference and inspire change in the industry.”
Pat Servat, Director, Growth and Innovation, CROSSMARK Australia
“For small-and-medium-sized businesses (SMBs), managing inventory can be particularly challenging given the limited margin for error and waste. Field sales and merchandising can help put things into perspective. Consider focusing on these key areas:
- Leverage data to understand shopper preferences and product performance: tailor promotional and replenishment strategies to highlight high-demand items in prime locations based on shopper behaviour. This reduces the need to keep excessive inventory for slower-moving products.
- Regularly audit in-store displays and shelf layouts: data can help you meet in-store compliance and conditions to drive results. For example, can you deem a promotion unsuccessful if there were issues with stock or the promotional display?
- Ensure accurate data input: automation is only as effective and smart as the data inputted. Many factors can affect the accuracy of this data, particularly when a shopper is involved. For example, at self-checkouts, the “tuna can” issue arises when similar products are mixed up, leading to imbalanced sales.
Having the right people on your team can make all the difference to your success in retail. Leverage your field partner’s flexibility, technology, insights, and strategies to grow market share and sales, and deliver cost-effective activations.”