Inventory Reduction Strategies

18 Targeted Inventory Reduction Strategies for Supply Chain Professionals

Inventory comprises an important part of current assets, particularly in manufacturing industry. A lot of cash flow is committed to inventories so as to ensure a smooth flow of production to meet a demanding customer service level. However, maintaining inventory also involves holding or carrying costs along with opportunity cost. Therefore, identifying inventory reduction strategies becomes critical for supply chain and operations professionals.   Inventory management therefore plays a crucial role in balancing the benefits and disadvantages associated with holding inventory. Efficient and effective inventory reduction strategies go a long way in the successful running and survival of a business firm. As Apple CEO Tim Cook says:   Here is […]

Vendor Managed Inventory (VMI)

Vendor Managed Inventory : A Step-by-Step Guide, Benefits and Risks

Given the disruptive nature of the supply chain dynamics, an important aspect of supply chain planning and control is the attempt by supply chain managers to improve supply chain performance. One way of avoiding this is to allow an upstream supplier to manage the inventories of its downstream customer. This is commonly known as vendor managed inventory (VMI). Vendor managed inventory (VMI) is a supply chain initiative where the supplier is authorized to manage inventories of agreed-upon stock-keeping units at customer locations. The benefits of Vendor managed inventory (VMI) are well recognised by successful retail businesses such as Wal-Mart. In […]

inventory management and control

How to Develop Traffic Light Inventory Management and Control Report in Excel to Reduce Stock Outs

Please raise your hand if you’ve ever panicked when your boss asked the question how many items are Out of Stock from Made to Stock list? Or How many items we are carrying too much excess stock? And it is not unusual that your boss wants this information in next 5 minutes! This is where inventory management and control report comes into play. Just to clear one point from start, I am not talking about inventory management and control reporting system from warehouse physical inventory control perspective but I am talking about inventory management and control report from a  planning/management […]

Safety Stock Formula

6 Safety Stock Formulas You Can Consider in Your Next Calculation Cycle

Safety stock is a term used to describe the additional quantities of stock held by a company to mitigate the risk of running out of stock. This therefore acts as a buffer in case the supply and demand are different to what was planned or forecasted. There are many ways in which to calculate safety stock and there are plenty of Safety Stock Formulas available which you could use. Below we will go through 6 different Safety Stock formula definitions to get a comprehensive figure for safety stock. At the end we’ve given you a ‘bonus track’ of EOQ calculation! […]

Inventory Management Model

The ABC-XYZ Inventory Management Model – Align Planning Parameter with Business Goals

Why Consider Inventory Management Model? One of the leading problems in SCM is the optimization of inventory. Inventory is actually a consequence of other business parameters and policies, such as:   Company goals and objectives: sales target, fill rate goals, purchase price variance, etc Operational policies and parameters: lead times, lot sizes, change over times, safety stocks, replenishment model, frequency and length of planning cycles, etc Efficiency in the execution of those policies: forecast accuracy, manufacturing & quality performance at all levels of the supply chain, etc Number of discrete levels in the business model: vendors, warehouses, factories, distribution centers, etc […]

ABC inventory analysis

Quickest Way to Perform ABC Inventory Analysis- Based on Value, Volume & Frequency of Sales

In supply chain most of us has been performing ABC inventory analysis for many years and in many different ways. This method has served us well and gives us several advantages. However, most supply chain analyst perform ABC analysis on value as you can see in this Wikipedia article and YouTube video. Over the years I have developed an algorithm to perform ABC inventory analysis which is based on Value (£ or $ ), Volume (Qty/Units) and Frequency (number of lines) of sales. I have performed this analysis in many different business and plants I’ve worked with and it has given […]

ABC analysis of inventory

6 Basic Benefits to Adapting ABC Analysis of Inventory

Inventory management is a critical task of tracking the flow of goods in and out of the inventory. As an inventory planner/manager you want to ensure that your warehouse is carrying enough stock to fulfill customer requirements but also not crowding the warehouse by overstocking it. Every product has various costs associated to it like holding costs, carrying costs and the aim of the inventory planner is to reduce these costs by not running low on stock. To help planners minimize these costs while optimizing their inventory, here is the ABC Analysis of Inventory technique and tool. What is ABC […]

Importance of Demand Forecasting

Importance of Demand Forecasting in Supply Chain- 9 Authentic Reasons

The importance of demand forecasting has been topic of discussion in economics and valuable books have been written on it over the years. However, within the supply chain context there are three types of forecasting, which are: Demand Forecasting: This is the investigation of the companies demand for an item or SKU, to include current and projected demand by industry and product end use. Supply Forecasting: Is a collection of data about the current producers and suppliers & technological and political trends that might affect supply. Price Forecast: This is based on information gathered and analyzed about demand and supply. […]

Cost

3 Holiday Seasons of Supply Planning You Need to Beware & Think Ahead Of

In my 10 years of supply planning experience I have observed that despite being aware of usual holidays seasons we encounter throughout year, we still find ourselves short of supply during the crucial holiday period which damages customer service drastically, adds significant amount to premium freight, contributing to customer frustration, affecting the overall brand image and profit earning opportunity and most  importantly loss of sales in crucial months. Given the fact that we should be thinking of Supply Chain Planning at different levels and different time horizons, we should consider and must put conscious effort to planning for the 3 […]

JIT System

JIT System and Supply Chain Management- 5 Salient Features

A JIT System (Just- in-time System) is an inventory management philosophy aimed at reducing waste and redundant inventory by delivering products, components, or materials just when an organization needs them. When I wrote a blog on JIT Purchasing there has been quite a lot comments and interest from the supply chain community on how it fits in overall inventory management system, therefore, I thought to expand on this topic.   It is well known fact that Kanban and JIT System were developed by the Toyota Motor Company during the 1950s and 1960s. The philosophy of Kanban and JIT System is […]