The Supply Chan Lab » Inventory

10 inventory forecasting issues

Tielman Nieuwoudt — Sat, 13 Dec 2008 11:43:38 +0000

Forecasting process – what is the current forecasting process and who is involved in setting targets?
Information technology – identify the current IT system(s) employed by the company and are regular upgrades and improvements taking place?
Collaboration – does collaboration take place between the various internal and external partners?
Items overstocked and out of stock – Which items are over and out of stock and what are the reasons? Is there a pattern emerging in the data?
Expired and out of date – What is the shelve life and how does it affect the forecasting?
Safety stock factor – are you using a safety stock factor and is it the same for all product SKUs and inventory classes?
Product life cycle – What are the current product life cycles and how do the various SKUs differ from one another?
Lead times- identify the product lead times and are there potential bottlenecks?
Process flow and visibility – do you have a clear understanding of the inventory flow and are there potential opportunities to reduce time wastage?
Continuous evaluation – is continuous evaluation and tracking taking place and are we tracking the right KPIs?

Cost cutting: Focus on long term goals

Tielman Nieuwoudt — Mon, 01 Dec 2008 09:49:18 +0000

With liquidity tightening, companies are increasingly looking for ways to cut spending. In a recent survey of Fortune 1,000 companies, 80% of respondents said that they look at supply chain departments for their cost cutting initiatives. However, cost cutting in supply chains requires the right mindset. As with any crisis, cool heads are required to steer the organization and the supply chain through tough times.

When does cost cutting fail? Supply chain cost cutting should not only be included in the agenda during a downturn. It should be a continuous process in any department. Companies that have a culture of continuous improvement are likely to have more success in implementing cost cutting initiatives.

Working with suppliers. Putting pressure on service partners to reduce cost is one thing, but when service partners fail, it can have severe consequences to the whole supply chain. When partners fail, customer service levels will suffer, and customers will be more likely to jump ship. Companies must work with partners and identify mutual cost cutting opportunities. With supply chain collaboration, companies are more likely to succeed.

Reducing inventory. Cash flow and working capital are both key to any company. Managers must evaluate ways to reduce cycle stock and delay payments. For example, companies can negotiate consignments and defer payments. Ownership of the consignment stock is not transferred until used.

Rationalize stock-keeping-units (SKUs). During the downturn, when sales are questionable, it can also make it easier for customers to make purchasing decisions. Also, during a downturn, companies can rationalize SKUs. Elimination of slow yielding SKUs will have a positive effect on working capital, often with limited impact on customer service levels.

The information technology crunch. For example, Transportation Management System (TMS) can reduce travel time and distance, and save on energy and fleet costs. Software, such as Business Intelligence (BI), can identify cost opportunities in the supply chain, including poor pricing principles and workflow processes. An investment in IT can help create the type of lean organizations that can keep companies running during the downturn.

Evaluate transportation. For example, companies can evaluate ways to reduce warehousing facilities. Companies can consolidate purchase orders from multiple distribution centers and cross dock. By making use of cross-docking, companies can reduce less than truck load (LTL) deliveries and improve efficiencies in the organization. Companies can also make use of postponement centers to reduce lead times and improve cash flow.

Evaluate contracts. During a slowdown companies must also evaluate compliance and contracts. Transportation departments should study contracts and payments carefully, and only pay for what they agreed on. Companies are normally in a much better position to negotiate better rates and request more flexibility. The downturn is a great time to get the transportation house in order.

To view the full article, please visit the supplychainworkz site.

10 ways to reduce inventory cost

Tielman Nieuwoudt — Tue, 21 Oct 2008 03:45:08 +0000

Determine cycle stock. Understand average inventory and reduce safety stock. Reduce overall lead time and lead time variability.
Understand total cost. Evaluate holding cost and have a clear understanding of real potential savings with bulk purchases.
Improved warehouse layout. Optimize warehouse layout and evaluate the potential of using narrow aisle handling equipment.
Rationalize SKUs. Eliminate low yielding SKUs to reduce holding cost. Understand one time events, seasonality and prior forecasts. Establish a baseline forecast.
Use cross-docking. Consolidate purchase orders from multiple distribution centers into a single order and cross-dock. This will reduce cycle stock inventory.
Evaluate merge-in-transit. Components are shipped from multiple suppliers and merged at a point located close to the end customer. Merge-in-transit avoids traditional warehousing and reduces overall holding cost.
Use technology. Use technology such as Vendor-managed Inventory (VMI) to increase visibility. Information replaces inventory.
Transfer stock. Transfer stock from one location to another to avoid unnecessary purchases.
Negotiate consignment stock. Ownership of consignment stock is not transferred until used. This can have a significant impact on your working capital and cash flow.
Collaborate with partners. Share information with suppliers to increase visibility and reduce overall supply chain cost.