Strategies to reduce inventory while maintaining customer service levels
Successful companies have recognized that carrying more stocks than you need results in a reduction in available cash flow and higher than necessary carrying cost in the warehouse.
Another problem is the very short lifespan of many products today. It is not uncommon for many companies to find themselves holding products that have unexpectedly reached their “end-of-life”. A product that is popular today is suddenly out of fashion, obsolete, or simply overtaken by new technology tomorrow.
This phenomenon suggests that prudent managers should keep a sharp eye on the current trends and ensure that they have the minimum quantity of a product that will ensure operations at the required customer service level while at the same time lower the risk of carrying end-of-life inventory.
Here are a few Stock Reduction Strategies
- Learn modern forecasting techniques – many companies still base their forecasts on just adding 10% or some arbitrary number to last year’s performance. This may work well enough in a situation where you are a small player in a large market and your strategy is to eat into your competitor’s market share. However, if your product is more of a “dependent type of inventory” this approach may not work very well for you.
- Increase Inventory Accuracy through Cycle Counting – In the quest to chase sales, Warehouse chores are often relegated to the back burner. You must cycle-count your stocks regularly to reduce variance.
- Use the Pareto Principle to Determine which of your products actually make money for you – Sales people often focus on selling the products that are easy to sell. Often these are the low margin high volume items. What about the other items? Why don’t they sell? Find out which of your products are the real money makers. Develop a good set of inventory analytics which give a good view of your business performance.
- Coordinate closely with Purchasing and Production Planning- Avoid holding large quantities of inventory. Fashion and tastes change very quickly these days. Encourage your staff to keep a close eye on stock movements and try to have only the quantities in the warehouse that are required for your current needs. Keep you safety stocks as low as possible while keeping the risk of going out of stock also low.
RMP Consultancy regularly conducts public and in-house training seminars in the areas of supply chain management and operations management including basic warehouse management, inventory management and logistics as well as purchasing and procurement management. Send us an email or give us a call and let us help train your staff.
Upcoming Warehouse, Inventory and Logistics Seminars
5 Dec 2019, Thursday, Basic Warehouse Operations and Inventory Control,
11 Dec 2019, Wednesday, Effective Inventory Planning and Management,
9 Jan 2020, Thursday, Good Warehousing Practices,
13 Jan 2020, Monday, Basic Warehouse Operations and Inventory Control,
17 Jan 2020, Friday, Effective Inventory Planning and Management,
Register for one of the Seminars Above
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Please Contact Claire or Marco
Landlines: Tel (632) 8697-0767, Tel (632) 8372-4563
Mobile (Globe) 0917-882-5578, Mobile (Smart) 0918-937-3455
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