When it comes to which technology has most lowered inventory costs in industry, there’s no clear winner. Companies that have achieved significant cost reductions use a variety of strategies, including demand forecasting and planning, lead time management, inventory optimization using the Economic Order Quantity (EOQ) model, and supply chain collaboration with suppliers.
Managing inventory effectively can help minimize carrying costs and avoid stock outs, while maximizing profitability. The key is to find a balance between optimal inventory levels and inventory cost, which can be accomplished by improving demand forecasting and inventory management practices, reducing order and lead times, optimizing inventory orders with the EOQ model or other inventory optimization techniques, implementing just-in-time inventory systems, minimizing safety stock and leveraging the first-in, first-out (FIFO) method of inventory accounting, negotiating better terms with suppliers, and using technology and automation to improve inventory tracking and analysis.
Another strategy for reducing inventory cost is implementing a cycle counting program to ensure that the number of products in the warehouse matches the number of inventory items recorded in the system, which helps reduce shrinkage costs from theft and clerical errors and minimizes obsolescence. Finally, centralizing inventory across multiple facilities enables smaller and more frequent orders, which can be less costly than holding large amounts of safety stock at each facility.