Executive Briefings

How to Optimize your Inventory

Managing inventory in the supply chain is critical to ensure high customer service levels. However, it is also a very costly asset to maintain. Having the right amount of inventory to meet customer requirements is critical. Find out what inventory best practices reduce inventory costs across the supply chain.
Here are 4 solutions to help keep you on top of your inventory.
1. Eliminate Dead Stock to eliminate wasteful costs of warehousing, handling, transportation and record-keeping for goods that are not selling.
2. Perform an ABC Analysis of your Inventory because 80% of your sales are represented by 20% of your items. From a management perspective, it's sensible to keep low inventory of 'A' items and arrange for frequent replenishments, reducing capital requirements. Conversely, the strategy best suited for 'C' items is to holding inventories and looking at other alternatives such as stockless buying. As 'B' items fall in between, they should be reviewed less often than 'A' items, however if they are 'key' items that consumers want, must be treated like 'A' items. For example, a young mother will want to purchase diapers for her new-born along with milk & bread, but if diapers are a 'B' item it must be treated as an 'A' item to ensure high customer satisfaction.
3. Arrange stockless buying/systems contracting by making the supplier responsible for ensuring that an adequate supply of materials is available at the manufacturer's facility. When a requisition request is generated in the manufacturer's system, it allocates inventory to production. At this point an invoice is generated and the manufacturer pays for the materials it used. This introduces beneficial process efficiencies into the management of purchasing and inventory functions for both the manufacturer and the supplier.
4. Vendor managed inventory systems place the responsibility for the replenishment function to the vendors who will arrange to have its products available to its customers at retailers' stores. They monitor sales and send the right quantities at the right time to ensure consumers will find the product on store shelves. VMI has evolved to Collaborative Planning, Forecasting and Replenishment, which included additional partners in the supply chain. Wal-Mart, a world leader in CPFR, has its own proprietary system called Retail Link, which gives all of its suppliers information on product sales history, inventories, in-stock percent, etc. across all of its retail locations over the last two years. Suppliers are responsible to maintain an in-stock level of 98.5%. The relationship works both ways. Wal-Mart provides this information for free to help its suppliers; however their suppliers must meet the 98.5% in-stock level if they would like to remain a Wal-Mart supplier.

Use the above four solutions to reduce inventory costs in your supply chain. One of the few remaining ways to drive down inventory costs are a result of organizations becoming more collaborative and sharing their data across the supply chain.
http://logistics.about.com

Managing inventory in the supply chain is critical to ensure high customer service levels. However, it is also a very costly asset to maintain. Having the right amount of inventory to meet customer requirements is critical. Find out what inventory best practices reduce inventory costs across the supply chain.
Here are 4 solutions to help keep you on top of your inventory.
1. Eliminate Dead Stock to eliminate wasteful costs of warehousing, handling, transportation and record-keeping for goods that are not selling.
2. Perform an ABC Analysis of your Inventory because 80% of your sales are represented by 20% of your items. From a management perspective, it's sensible to keep low inventory of 'A' items and arrange for frequent replenishments, reducing capital requirements. Conversely, the strategy best suited for 'C' items is to holding inventories and looking at other alternatives such as stockless buying. As 'B' items fall in between, they should be reviewed less often than 'A' items, however if they are 'key' items that consumers want, must be treated like 'A' items. For example, a young mother will want to purchase diapers for her new-born along with milk & bread, but if diapers are a 'B' item it must be treated as an 'A' item to ensure high customer satisfaction.
3. Arrange stockless buying/systems contracting by making the supplier responsible for ensuring that an adequate supply of materials is available at the manufacturer's facility. When a requisition request is generated in the manufacturer's system, it allocates inventory to production. At this point an invoice is generated and the manufacturer pays for the materials it used. This introduces beneficial process efficiencies into the management of purchasing and inventory functions for both the manufacturer and the supplier.
4. Vendor managed inventory systems place the responsibility for the replenishment function to the vendors who will arrange to have its products available to its customers at retailers' stores. They monitor sales and send the right quantities at the right time to ensure consumers will find the product on store shelves. VMI has evolved to Collaborative Planning, Forecasting and Replenishment, which included additional partners in the supply chain. Wal-Mart, a world leader in CPFR, has its own proprietary system called Retail Link, which gives all of its suppliers information on product sales history, inventories, in-stock percent, etc. across all of its retail locations over the last two years. Suppliers are responsible to maintain an in-stock level of 98.5%. The relationship works both ways. Wal-Mart provides this information for free to help its suppliers; however their suppliers must meet the 98.5% in-stock level if they would like to remain a Wal-Mart supplier.

Use the above four solutions to reduce inventory costs in your supply chain. One of the few remaining ways to drive down inventory costs are a result of organizations becoming more collaborative and sharing their data across the supply chain.
http://logistics.about.com