Inventory
ManagementInbound manufacturing inventory management can be a costly challenge,
even for the best supply chain and logistics teams.
The
solution for some, as was written previously on this topic, is to carry excess
inventory to compensate for deficiencies in the supply chain management. This
only adds to the cost. It has been estimated that annual inventory carrying
costs can comprise up to 20-35% of total product value.
Maybe
it’s time to rethink inbound inventory management. Instead of “reducing”
inventory, optimize it. A combination of proven practices supported by
inventory data analytics and vendor participation can lead to optimized
inventory management. Organizations can improve end-to-end visibility, heighten
inventory accuracy, and free up capital not nested in excess inventory.
Starting
with the production line and working from there, these seven steps can augment
inventory optimization:
Step
1: Use standard pack and packaging. From the right packaging to the right-sized
container, deliberate attempts at standardization can ensure two hours of
material is at the line side, for example, as opposed to two days’ worth.
Step
2: Create end-to-end supply chain visibility. It’s been said that organizations
will over-order to counter a lack of confidence in the supply chain. Instead,
boost supply chain visibility. Using supply chain design software,
organizations can tap data to discover inefficiencies, identify problems and
analyze solutions. With improved accuracy comes increased confidence – and
reduced over-ordering.
Step
3: Make sure all key departments are informed and on board. In many
organizations, logistics, purchasing, packaging or a host of groups are
empowered to make decisions affecting the supply chain. Do they know how those
decisions will affect others? If not, teach them. Engage packaging engineers to
help educate these disparate departments better understand their role in – and
impact upon – the supply chain.
Step
4: Forget local, you’re global. In the global economy, inventory is sourced
worldwide. So manage it at a global level. Modern inventory management
optimization requires an understanding of lead times and transit times, for
example, or the power – and weakness – of consolidated freight. Think beyond
the implications that steered 20th century logistical decisions and take a 21st
century global view.
Step
5: Consider vendor managed inventory (VMI). In this symbiotic, shared-risk
model especially embraced by international shippers, suppliers own, manage,
store and ship the inventory. Upon its arrival at the buyer’s location, often a
manufacturing facility or warehouse nearby, the buyer takes ownership. VMI
works best after a thorough analysis and, if pursued, with guidelines and
expectations in place.
Step
6: Put product in the right place. Warehouse slotting, also called profiling,
seeks to place stored inventory in the optimal location in the facility. With
the help of an industrial engineer and data on inventory flow, a slotting
blueprint will place products based on proximity or anticipated need. This can
improve warehouse flow and overall efficiency.
Step
7: Demand supplier compliance. Organizations may have well-optimized inventory
management solutions. But if their suppliers are sloppy, over-ship product,
miss delivery schedules, or fail to provide accurate or current data, efforts
at optimization are wasted. Supplier compliance is essential. Hold them
accountable.
Supply
chain inventory optimization is not a one-time act, but an ongoing habit. By
adhering to best-in-class inventory practices and pursuing constant
improvement, manufacturers can reduce dock-to-stock cycle time, improve
order-picking accuracy, free up capital, and optimize overall inventory management.
http://blog.ryder.com/2015/06/rethinking-supply-chain-inventory-optimization/#sthash.ufL3zBl2.dpuf