6 Keys to Achieving Sustainable Inventory Management
September 5, 2024 - 11 minutes readWhy the greenest practices are also the most profitable.
Almost 80 years ago, the concept of sustainability was described as a harmonious combination of environmental and social factors in the decisions and activities of a business. Sustainability goals in industries like forestry, transportation, and agriculture are often tied directly to their carbon footprint, but inventory management encompasses conditions and constraints that can make sustainability metrics more subjective. With the unavoidable consumption associated with inventory management and omni-channel commerce, it is important to think of sustainable inventory management as a journey rather than a destination.
The best inventory management, mobile point of sale (POS), warehouse management, and order management software tools and practices save valuable time, money, and energy by improving efficiency and reducing waste, while laying a foundation for sustainable inventory management.
“We don’t have to engage in grand, heroic actions to participate in change. Small acts, when multiplied by millions of people, can transform the world.” – Howard Zinn
What is sustainable inventory management?
Sustainable inventory management encompasses the storage, handling, and transportation of inventory in ways that purposefully minimize environmental impact and promote social responsibility. These objectives can be met by reducing waste, using resources more efficiently, and choosing sustainable suppliers and products. The four basic principles (or “4 Rs”) of sustainable inventory management are:
- Recycle. Inventory management processes produce large amounts of single use cardboard, metal, and plastic waste that can be recycled easily.
- Reuse. Many common materials and products can be used many times over before they are thrown away.
- Recover. Waste materials can sometimes be converted into other usable products or fuels.
- Reduce. The overarching concept of consuming less. This extends from raw materials, transportation, and packaging to warehouse space and energy consumption.
The technology we need to support sustainable inventory management is improving quickly, including automated picking and handling systems to save energy, transportation management systems (TMS) to reduce fuel consumption, and inventory management software to optimize ordering, distribution, and cycle counting practices.
Why is sustainable inventory management important?
49% of organizations have already established supply chain sustainability goals to become more environmentally responsible, and they are reaping many other benefits from these practices. With waste reduction and efficiency as primary objectives, it is easy to see why sustainable inventory management saves companies money and improves their order fulfillment times. Additional benefits of sustainable inventory management include:
- Enhanced brand reputation with customers and investors
- Compliance with regulatory requirements
- Improved supply chain transparency and traceability
Warehouse operations contribute to greenhouse gas emissions through their storage, picking, sorting, and packaging operations. Transportation and order fulfillment services are conspicuous for high fuel consumption, as E-commerce retailers rely on home delivery services to remain competitive. These trends must also be addressed to establish truly sustainable supply chains.
6 keys to achieving sustainable inventory management
There is no magic solution that produces a sustainable, carbon-neutral supply chain overnight. However, there are many straightforward steps manufacturers, retailers, distributors, and suppliers can take to incrementally improve their sustainability.
1. Implement lean methodologies
Lean methodologies developed to improve quality and productivity in the manufacturing industry align with sustainability goals by continually seeking out new ways to reduce time, waste, and cost. The sources of waste targeted by lean initiatives include inherently unsustainable over-production, unnecessary transportation, and unused machine capacity.
Just-in-time (JIT) inventory management is based on a “pull” system that minimizes part movement and storage by tying manufacturing and warehouse processes directly to customer orders. This lean concept complements sustainability goals by dramatically improving efficiency and preventing unused parts and finished goods from being thrown away.
2. Reduce packaging waste
Packaging can be low hanging fruit for sustainable supply chain and inventory management initiatives, with almost one-third of all municipal waste in the United States attributed to packaging. The packaging materials we store, purchase, and ship might seem like an inevitable part of doing business, but there are many practical ways to reduce packaging waste, including:
- Utilizing biodegradable packaging materials that can be composted easily
- Minimizing filler materials like bubble wrap and packing peanuts
- Developing reusable containers to transport materials to and from suppliers and customers
Sustainable packaging methods also contribute to greener transportation by shrinking container sizes, consolidating shipments strategically, and reducing shipping weight to save fuel.
3. Green procurement
Green procurement refers to practices that spread sustainability goals throughout the supply chain. Rather than basing supplier and part selection decisions on cost alone, green procurement methods also consider the environmental impact of each purchase. Research has shown that green procurement not only reduces environmental impact and waste but helps to address social and ethical concerns. Despite de-emphasizing cost as a deciding factor, this environmentally conscious strategy has also been shown to save money through improved material quality and reusability.
“The purchasing department must change its focus from lowest initial cost of material purchased to lowest total cost.” – W. Edwards Deming
4. Optimizing reverse logistics
The concept of reverse logistics, or returning products back through the supply chain to the retailer, distributor, or manufacturer, has gained importance as E-commerce drives higher return rates and customers come to expect seamless returns and exchanges. Reverse logistics are also fundamental to sustainability, since transportation and raw material consumption rates are directly impacted by these workflows.
Reducing product return rates, encouraging reuse and refurbishment, and optimizing product designs for end-of-life recycling and waste management are some of the ways reverse logistics strategies become key elements of an overall sustainable inventory management philosophy.
5. Improving warehouse efficiency
Warehouse operations encompassing everyday tasks like receiving, picking, loading, and counting present many opportunities to reduce energy consumption and eliminate waste. Proven strategies to improve warehouse efficiency include:
- Streamlining warehouse layouts to reduce bottlenecks and floor space requirements
- Utilizing bar code scanning and RFID tags to accelerate cycle counts and improve accuracy
- Prioritizing maintenance to avoid equipment breakdowns and safety issues
- Optimizing loading and unloading schedules to prevent truck idling and logjams
Warehouse management software and warehouse management apps promote efficiency and sustainability by collecting and analyzing data on part movement, order processing metrics, and loading/unloading times to unleash continuous improvement opportunities.
6. Utilizing inventory management software
Versatile inventory management software is essential for optimizing inventory levels, providing accurate forecasts, and streamlining order fulfillment and cycle counting processes to reduce waste. Mobile inventory management, warehouse management, and POS apps bring real-time information directly to warehouse managers, retailers, and customers to minimize unnecessary trips to and from inventory locations.
Inventory management software supports sustainable practices like JIT, green procurement, and reverse logistics, with readily available data and analytics utilized to improve the effectiveness of these programs. Effective inventory management is also a prerequisite for warehouse efficiency initiatives that shrink the carbon footprint.
Sustainable inventory management challenges
The cost savings and other benefits provided by sustainable inventory management should make the decision to implement an easy one. However, after decades of accepting current processes and priorities as the norm, making meaningful changes can be challenging due to:
- Lack of sustainable supplier options
- Customer expectations for fast delivery
- Legacy non-recyclable products and packaging
- Overproduction to prevent stockouts
Implementing sustainable practices in the face of E-commerce competition, low prices, and overnight delivery requires patience and perseverance. Measurable, long-term changes are only possible when a culture of sustainability is developed and reinforced with each new initiative.
Sustainable inventory management: Final thoughts
Businesses continue to search for sustainable partners and suppliers, while customers look for additional green alternatives. As standards are adopted to make environmentally friendly practices mandatory, sustainable inventory management is no longer optional. The new software and technology developed to redefine agriculture, transportation, and energy production has also launched a new era of inventory management.
The scalable, cloud-based, Agiliron product suite supports sustainable inventory management with mobile-friendly, customizable solutions that integrate seamlessly with all leading E-commerce platforms. Warehouse management, customer relationship management (CRM), and inventory management modules collectively leverage the power of real-time data to provide sustainable options, while mobile POS lets you sell in more places but manage from one.
Sustainability isn’t just good for the environment; it makes good business sense. Each step towards sustainable inventory management improves efficiency while triggering a continuous improvement cycle. Contact us today and allow our solutions experts to explain how inventory and warehouse management software solutions can become the foundation of your sustainability strategy.
Tags: inventory management