Can bulk shipment help cut inventory cost?

Inventory management for long has been a concern point for all companies. The need to reduce the wastages, increase ROI and efficiency has led to development and usage of Modern Inventory practices like JIT, Pareto’s Law, Drop Shipment, etc. However, even now many companies resort to older ways of cutting costs in inventory. A prime example of the same is Bulk Shipment. While it is still one of the easiest and economical way to gain more profits, does it truly save costs.

Reasons why Bulk Shipment saving inventory costs maybe a myth:

1. Huge Capital Investment – Transportation, holding, warehouse, distribution, packaging, etc. All of these cost a lot including taxes and documentation. To ship a product even in bulk over a long duration requires special packaging so that the goods are not damaged. Small things like transportation route also matters in the shipment process. In a prime example, in the US, UPS drivers don’t take a left turn and emit 20,000 tonnes less carbon dioxide and delivers 350,000 more packages every year.

2. Holding Cost – Holding cost forms another major issue in Bulk Shipment. The goods need to be first stored in a place until every piece to be shipped is there and the documentation is clear. It can take from a few days to few weeks. The holding cost for the warehouse and the product can add up to the total costs not helping the supplier or the dealer. In eventualities, if the supplier is forced to hold the inventory for a longer time, it will add up to the total cost of the product that the supplier cannot recover from the dealer or the customer and needs to be borne by himself.

3. Product Pilferages – Product pilferage and damages are another reason adding costs of inventory. To ship the product for a long distance, special packages are required and even then, if there are damages, the loss of the price cannot be replaced. Not only while transportation, but also when handling the goods, there can be damages to the goods that cannot be recovered by any means.

4. Poor sorting and distribution – Warehouses without a proper tracking software of goods can be a maze for the company. Poor sorting and distribution of goods can result in damages as well as delay in shifting goods to be transported to the distribution centre. The company over here needs to have a smart ERP software linked with their warehouse management software to not only locate the goods in the warehouse, but also to keep the management updated of all information regarding the product. It then becomes easier for the company to employ methods like LIFO, FIFO based on the batches in the system.

5. Paying hefty insurance amounts – Goods being shipped overseas have a hefty insurance and documentation attached to them. Without a proper system like an ERP software linking inventory, distribution and vendors on one platform, it can be a nightmare for the exporter. The goods need to be of the export quality as specified by the receiving country / dealer and it means that there will be a thorough inspection of the goods at both the ends. Having an inspection module mapped with your ERP software eases the need for manual documentation and provides everything in one place itself.

For more information on how can Sage ERP solution reduce your inventory management woes, send an email to sales@sagesoftware.co.in for a free consultation.