We all know that a key priority for supply chains is to provide customers with
what they want when they want it. In fact, it is the sole reason that many
companies even exist.
At the same time, companies are striving to keep their working capital low
and their customer service high. This is why it is so important to develop an
effective approach to inventory
management.
As
total logistics costs as a percentage of sales are declining, it is a fact that
most companies succeed by reducing inventory levels.
Since inventory can be a tricky concept to understand universally, learning
how to manage inventory effectively is essential to your supply chain’s growth
and success. Believe me, improvements will show in your overall operations.
I’ve listed below the Top 25 Ways to Lower
Inventory Costs, and you can check out the full article, written by our
inventory guru, Ralph Cox, in Supply Chain
Management Review.
- Base cycle stock on economics
- Reduce order transaction costs
- Lower inventory holding costs
- Base safety stock on customer service
- Forecast routine demand based on statistics
- Forecast future one-time events based on past
events
- Think postponement
- Rationalize SKUs
- Reduce acquisition lead times
- Implement joint procurement
- Minimize purchase minimums
- Get downstream forecasts and send forecasts
upstream
- Don’t stock it, or if some stocking is required,
at least not everywhere
- Cross-dock customer shipments
- Extend payment terms
- Take advantage of price/quantity breaks
- Transfer instead of purchase
- Liquidate
- Use merge in-transit
- Exploit collaborative Planning and Replenishment (
CPFR)
- Use vendor-managed inventory (VMI) and vendor
stocking programs (VSP)
- Estimate reserves accurately
- Maintain accurate inventory balances
- Implement a Sales and Operations Planning (S&OP)
process
- Measure performance
Ralph also participated in a recent
webcast in which he provides a
concise overview of how to cut inventory costs.
Post a comment below if you have any thoughts on the Top 25, or we’d like to
hear from you if you have any inventory questions that you would like to throw
at me or Ralph.
Go!Go!Go!
Jim
More Resources:
25 Ways to
Lower Inventory Costs
10
Proven Ways to Cut Your Inventory Costs
Inventory
Management: Minimizing Cycle Stock and Safety Stock for Increased Shareholder
Value
Evolution to World-Class Inventory Management
Executive
Reporting: Understanding Inventory Performance Over Time
Photo Credit: images_of_money