As noted in a recent Industry Week article which made the astute observation that you should layoff your inventory, not your employees, inventory carrying costs can easily range from 15% to 25% of total inventory value on an annual basis (and at low performers, it can get as high as 35%). On a million dollars of inventory, that’s a $150,000 to $350,000 expense which could potentially wipe out your entire profit margin. For an average organization, that’s 2 to 6 employees whose jobs could be saved through better supply chain execution.
A great way to achieve this savings is to acquire modern demand planning and inventory optimization software that will help you improve your forecasts, trim your inventory, and your associated costs. The less inventory you have, the less you have to store. The less time it is in a warehouse, the lower your overhead costs. And having it when you need it prevents the extra transportation costs associated with expediting.
But most importantly, you don’t have to be a large organization to take advantage of today’s affordable on-demand inventory management solutions. Chances are a small organization with only a million dollars of inventory will see a decent return on a basic SaaS inventory management solution.