Jane Lee

Speaker: Jane Lee, VP, Supply Chain Consultants

Topic: Identifying Inventory You Can Reduce Now!

At the last PDM of the year, Jane Lee from Supply Chain Consultants presented on Inventory You Can Reduce Now. It was a real back to basics approach to reigning in your inventory.

Jane identified three inventory categories that can be targeted immediately.

• Worthless Inventory – Inventory that is nonexistent or lost, consignments without written maximums, old, out-of-specification, excessive rework, obsolete, or expired materials.
• Nearly Worthless Inventory – Transition material, by- products / co products, phased out material, made too much on expectation of an order.
• Excess Inventory

To reduce these inventories, start with a good forecast and augment it with good communication between sales and manufacturing. AMR (Supply Chain Research Firm) reports that the best companies at demand forecasting average:

• 15% Less Inventory
• 17% Stronger Perfect Order Fulfillment
• 35% Shorter Cash-to-Cash Cycle Time
• 90% Fewer Stock-outs

One way to check how volatile your forecast will be is to look at the customer count: the more customers you have the more diversified you are at reducing overall variation in demand.

If you are storing inventory in multiple locations, it may prove cost effective to rebalance inventory after examining demand location. Before any inventory is moved, it is important to evaluate the cost associated with the move, which means looking beyond transportation cost into areas like warehousing and material management.

There is opportunity to free up capital by keeping inventory accurate and right-sized, so during these complex times having the right amount of the correct inventory will provide a competitive advantage.