By:

Harshi 12609045
Sakshi Jain 12609011 Poonam Gupta 12609190
3/18/2014 Inventory Reduction 1

What Is Inventory ??
Inventory is the raw materials, component parts, workin-process, or finished products that are held at a location in the supply chain. Possessing a high amount of inventory for long periods of time is not usually good for a business because of inventory storage, obsolescence and spoilage costs. However, possessing too little inventory isn't good either, because the business runs the risk of losing out on potential sales and potential market share as well.

3/18/2014

Inventory Reduction

Why reduce inventory ??

Reducing inventory levels has a number of advantages for your business. Cost Controls By reducing your inventory, you limit the amount of floor space and storage area you have to dedicate to holding the excess. Less Waste Reducing inventory also minimizes your waste. Some products perish, expire or simply go out of season or style. By reducing your inventory levels, you mitigate the value of products that are thrown out or sold at marked down prices.
3/18/2014 Inventory Reduction 3

Why reduce inventory ??

Fresh Stock By reducing inventory and getting it turned over quickly, you can move merchandise around and keep fresh products rotating on a regular basis. Working Capital

When you only carry the inventory necessary to meet near-term customer demand, you free up working capital to invest in other business needs. Prioritizing where to put money in the short-term to drive business growth is key to getting the ball rolling toward long-term financial success.

3/18/2014

Inventory Reduction

Reduced level of inventory is able to expose productivity problems

Large rocks are hidden problems due to excess level of inventory

3/18/2014 Inventory Reduction 5

Reduced level of inventory is able to expose productivity problems

3/18/2014

Inventory Reduction

Lower Inventory level leads to better utilization of resources

3/18/2014

Inventory Reduction

3/18/2014

Inventory Reduction

Reducing Inventory
Reduce lead times
This will allow a downward adjustment of safety stocks, and an improvement in availability. If supplier lead times can be reduced to below the required lead time to the customer, this will remove the requirement to hold stock altogether. Halving lead time should reduce safety stocks by about 30% for the same availability.

Improve your forecasting

You must understand and collect the inputs that drive demand. The data must be accurate. Get as close as possible to true demand. Review the forecasting method. If you have the right inputs and the data is clean, basic forecasting methods will produce good results.

3/18/2014

Inventory Reduction

Reducing Inventory
Optimize Your Network Design
In multiple-echelon operational networks across large geographical areas, significant inventory reductions can be made through network design optimization. The fewer stocking facilities used the better, as safety stock inventory is proportional to the number of warehousing locations. Often, a reduction in the number of these facilities results in a significant decline in inventory and overall inventory costs.

Order more frequently

Order little and often: this reduces the cycle stock. Ordering twice as often will halve the cycle stock. There is a cost: each order comes with an administration overhead and a labor cost to receive the goods, but the ordering cost is much less as compared to the inventory holding cost.

3/18/2014

Inventory Reduction

10

Reducing Inventory
Lean manufacturing
Making value flow at the pull of the customer, the idea of Just in Time (JIT) production. This will cause us to remove the main cause of inventory that of overproduction.

Look at factory and cell layout and balance your production processes to ensure that work in progress does not build up between processes, it is not important to run every machine as fast as it can be run, at the end of the day we only need to make things as quickly as the customer wants them, no faster; Kanban can be used to help ensure that we balance our processes and prevent the build up of inventory.

3/18/2014

Inventory Reduction

11

Techniques for Inventory Control

HML (high medium and low) Two bin system SDE (Scarce , difficult and easy)

ABC (always better control)

Inventory Reduction

FSN (fast, slow and non moving)

VED (vital, essential and desirable) Max min system

EOQ(econ omic order quantity)

3/18/2014

Inventory Reduction

12

3/18/2014

Inventory Reduction

13