6 Lean Inventory Management Best Practices For Wholesalers


As you continue to seek growth as a wholesale distributor, one of the best ways to scale successfully is to implement lean inventory management practices. Such practices can lift your profitability, improve inventory turns and lend to financial stability, all factors that will aid in your long-term success.

While lean inventory management practices will take time to implement, require employee buy-in and an investment up front, its benefits will boost your business’ profitability and increase cash flow.


What is Lean Inventory Management?


Lean inventory management is exactly what it implies. It’s the practice of keeping a lean amount—or minimum amount—of inventory. Inventory maintenance requires money, time and labor to manage. Lean inventory management helps wholesale distributors find the right balance between existing inventory levels and being able to fulfill every order successfully.


Stock too little inventory and you risk being unable to fulfill orders and disappointing customers. Stock too much and you’ll find your margins drop and warehouse costs rising. Using lean inventory management helps you find that balance in between.


Utilizing five principles, lean management includes the following five-step process:


Establish value.

Define the value that lean inventory management will be to your company. What does it mean to your company? What do you expect to get out of it?


Map the value—or flow.

Map the journey that inventory makes when it arrives to your warehouse, all the way to when it is purchased by a customer and shipped. Who are the people involved along the way? Does the current process make the most sense?


Create flow.

After removing waste or redundancy in the value stream, ensure the flow of goods—from receipt into your warehouse to when it ships to a customer—runs smoothly.


Establish pull.

Instead of overstocking and hoping to push inventory out the door, use just-in-time delivery to limit stock but meet customer needs.


Aim for perfection.

While perfection is difficult to attain, the idea here is that you’re always working on improving the process. This includes getting every employee on board with always working towards improvement.


In essence, lean inventory management is comprised of a set of technology that helps you track inventory KPIs, a system to manage it all and a philosophy—one that the entire company believes in.


Hey! Ready to automate your inventory management? Click here to request a demo to see why Finances Online ranked Systum the #1 Distribution Software on the market.


6 Best Practices for Lean Inventory Management


1. Establish and Monitor Minimum Stock Levels

Because you’re working towards keeping inventory levels lean, you’ll want to establish a minimum stock level for each product or product family. Ideally, you have a wholesale inventory management software in place that helps you automate this. For example, set an alert in your inventory management software to notify warehouse management that inventory has reached a predefined minimum. Once they approve the order that is needed and recognize that inventory is low, your software should automatically issue a purchase order to your supplier so that you never run of out stock.


2. Implement Inventory Forecasting

This method requires a look back into the past—specifically product trends— and the future. By reviewing which items move the fastest and slowest, combined with historical or seasonal trends, one can determine how products or product families should be stocked. For items that move quickly year-round, you’ll want to maintain a healthy minimum stock level and place orders regularly with that supplier. The more accurate your forecasts, the better your inventory turn ratio will be.


3. Use AIDC (Automatic Identification Data Capturing)

Once you’ve implemented labeling and barcodes in your warehouse, you’re able to track assets much easier than if assigned solely to employees and an Excel spreadsheet. By scanning incoming and outgoing inventory, you’re automatically capturing that data and pushing it back to your inventory management software. This saves time, money and the occasional, yet unfortunate human error. By keeping these processes running smoothly with the help of technology, you’ll have access to stock levels in real-time, which is a proven advantage for wholesale distributors.


4. Keep a Close Eye on Deadstock

Because lean inventory management suggests that you are optimizing inventory turns, you’ll want to implement FIFO (First In, First Out) in order to avoid dead stock. Dead stock not only takes up valuable space in your warehouse, it ultimately costs you money.  Be sure to monitor stock that isn’t moving—especially if it’s perishable—and run a special or sale on those items to get them out of your warehouse.


5. Get Employee Buy-In

If your employees aren’t aware that you’re working towards lean management, you don’t have the buy-in you need. Because you’re striving towards perfection, everyone should have input on the processes used manage your inventory. Your employees are the ones that are living and breathing inventory management every day. Ask for input on how and where processes could be improved. With management setting the tone, it's possible you’ll find some of the solutions you need from your own employees.


6. Use Inventory Management Software and Automate Everything

Last but not least, use cloud-based software to track your inventory in real time. Automate when it makes sense. For the companies that put technology to use, the benefits can be realized from day one. Today’s most successful wholesale distribution companies use technology to differentiate themselves. Because software can help you put the customer at the center of your operations, many companies find that customer satisfaction and profitability improve significantly.


Are you ready to implement lean inventory management with the help of software?


Tired of using inventory templates? Systum is the industry’s first enterprise-grade, affordable business platform that helps you run your wholesale, distribution or digital commerce business. Switch to Systum and optimize your operations, unify data and better serve every customer from one dashboard. If you’d like to learn more about how Systum can help you improve inventory management, fill out the form below.


Categories: Inventory Management, Wholesale Distribution, Software, B2B eCommerce

Tags: inventory management, inventory, inventory software, wholesale, wholesale distributor

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Hope Davo

VP of Marketing at Systum, Hope is responsible for marketing, communications and branding. When she’s not building marketing programs, chances are she’s running around after her two kiddos or enjoying an indoor cycle class.

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