How can inventory be reduced

Salable throughput decreases while customer service goes down. Generally, the cycle just keeps repeating itself, further compounding cash flow, profit and service problems. Most executives agree that top-heavy inventories are a giant cash vacuum and need to be reduced in order to free up cash for investment in revenue-growth activities.

How can this be accomplished? One of the major impediments to inventory reduction is the mistaken notion that just improved inventory management is all that is required to get the job done.

The real culprits are the inefficient business processes that cause excessive inventories to exist in the first place. Certainly, lack of control contributes to excessive inventory, but often behavior in inventory-controlling functions is driven by management's highly negative reaction to material shortages compared to rare and less severe response to high inventory levels.

Send the correct signals to those functions that control inventory so that they are properly motivated towards reduction. For the most part, it is inadequacies in cross-functional business processes that cause the need for inventory buffers to exist; address the cause of the problem, not the result. Identify the underlying causes, get control so that inventory buffers are not needed, then reduce the inventory accordingly.

Otherwise, the inventory reduction will only exacerbate the underlying problem. Major reductions 20 to 50 percent or more in all forms of inventory, without harming customer service, usually require the re-engineering of the order-to-delivery cycle to find ways to do it faster, better, cheaper.

Dramatic rethinking of business processes often results in significant reductions in lead times and increases in control that eliminate the need for inventory buffers. As a bonus, this kind of change usually pays benefits in increased quality and improved customer service. Improve supply chain management. By streamlining the entire supply chain, a company can reduce inventory, improve time to market, compress cycle times, free up more cash, decrease costs and improve profitability.

World-class manufacturers have allocated the necessary resources to speed up the order-to-delivery cycle and improve the entire supply chain with the result clearly visible in customer service performance and the reduction of all forms of inventory.

Through this window, suppliers for example can find out when the customer will run out of the item they supply and automatically restock it. This streamlining of the supply chain enables manufacturers to reduce inventory buffers, decrease cycle time and achieve significant cost reductions.

In addition, many manufacturers are actively consolidating their supplier base, using fewer vendors but establishing a much closer relationship with those they do business with. Both parties gain greater business leverage through such relationships. The manufacturer and the supplier, in many cases, work together to improve products and operations and thereby reduce material costs, improve delivery timing, and the like.

Advanced Planning and Scheduling for Inventory Reduction in the Manufacturing Industry An essential component of advanced planning and scheduling APS systems involves inventory planning. An advanced planning and scheduling system can help with inventory reduction through: Optimized Capacity Plans - Know forecast load-versus-capacity including equipment, tooling, and labor constraints.

Optimize automatically to maximize the KPIs of interest for your organization. What-If Scenarios - These types of scenarios allow you to evaluate your abilities to meet variable forecasts. You can simulate evolving or adding equipment and employee skill extensions to determine whether you will be able to meet increases in demands. Enterprise Capacity Visibility - See workload and capacity at any level: company-wide, plant-by-plant, departmental, or even down to the resource.

Various reports can identify which items are taking most of the critical resources times. Just-In-Time Scheduling - One of the most well-known strategies for reducing inventory is to use a Just-In-Time strategy for production.

An APS system allows you to easily schedule operations so that jobs will be completed just when they should to ship out. This reduces the number of WIP items and finished goods that need to be stored. The shift to PlanetTogether is saving us about 15 percent in inventory overhead and about 20 percent in overtime labor expenses.

Advanced Planning and Scheduling APS Software Advanced Planning and Scheduling Softwares have become a must for modern-day manufacturing operations as customer demand for increased product assortment, fast delivery, and downward cost pressures become prevalent.

With PlanetTogether you can: Create optimized schedules that balance production efficiency and delivery performance Maximize throughput on bottleneck resources to increase revenue Synchronize supply with demand to reduce inventories Provide company-wide visibility to resource capacity Enable scenario data-driven decision making The implementation of an Advanced Planning and Scheduling APS Software will take your manufacturing operations to the next level of production efficiency by taking advantage of the operational data you already possess in your ERP system.

Related Lead-time Reduction Video. Case Studies. White Papers. Recent Posts. How to Buy. Pricing Scorecard Features Partners Benefits. Partner Portal Become a Partner. Latest Trends in APS. Follow us. At other times tough, durable, permanent labels are needed to mark shelving and the floor.

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If you are considering implementing Kanban in your facility, pick up a copy of our free Kanban Best Practices Guide for expert advice on how to take action. Get your free copy below! Linking Lean and Visuals.

Leverage visuals such as signs and labels to experience lean benefits and improve all aspects of the workflow.

Inventory Planning. Understand various inventory planning strategies and weigh the advantages and disadvantages of having a large inventory. Find out how to implement the Kanban lean system in your facility with real-world examples and recommendations.

Home Resources Articles Inventory Reduction. Benefits of Inventory Reductions A number of benefits result from inventory reduction. These include: Lower Costs Less money tied up in inventory. Less warehouse space is required. Lower insurance costs, as the risk of loss is reduced. Fewer losses due to spoilage, or to expired or out-of-date products.

Less Labor Reduced labor to track and verify inventory. Less labor to maintain the warehouse s. Smaller warehouses are easier to manage. Improved Quality When product improvements are made, there is not a need to sell off large quantities of the older, obsolete product.

If there is a defect or design problem, large quantities of defective product do not end up in inventory because there are no large inventories.

Some of those include: Not having enough product available to meet customer demand and delivery requirements. Short production runs result in increased production costs. Without stocks of raw materials, a minor supply delay can completely stop production.

Lean Manufacturing and Inventory Reduction The core idea behind lean manufacturing methods, such as Kanban is to have supply and production driven by actual customer demand. Related Resources. Linking Lean and Visuals Leverage visuals such as signs and labels to experience lean benefits and improve all aspects of the workflow. Inventory Planning Understand various inventory planning strategies and weigh the advantages and disadvantages of having a large inventory.

Kanban Find out how to implement the Kanban lean system in your facility with real-world examples and recommendations View.