Inventory reduction is about eliminating excess inventory,
improving inventory turn rates,
increasing inventory turnover, and meeting on
time delivery. Excess inventory ties up money and needs to be reduced in order
to free up cash for investment in revenue-growth activities. One of the major
problems to inventory reduction is the mistaken notion that improved inventory
control management is all that is required to improve inventory rates,
increase inventory turnover and provides an on going inventory reduction
program. Certainly, lack of control contributes to excessive inventory, but
often an organizations negative reaction to material shortages, and that the
major focus of most material groups is to supply required inventory and not
look for ways to improve inventory turns, is the driving factor in poor
performance in inventory reduction.
Many companies have achieved inventory
reduction and improved on time delivery by implementing systems such as
Enterprise Resource Planning (ERP), Just in Time (JIT), Kaban, and other
approaches to inventory management, and these systems do reduce inventory and
improve inventory turnover, but there is still room for improvement. There are
some basic steps that any company can use to improve inventory turnover:
Set a realistic objective for inventory levels.
Identify those items that are in excess of acceptable
inventory levels
Identify obsolete and defective inventory.
Make a list of actions to be taken to reduce the
inventory
Devise new procedures to help eliminate future build up
of inventory.
Measure, measure, measure
Call or e-mail us for a free evaluation of your
Inventory Reduction concerns.
