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Inventory Management

#13 Implement “Certified” suppliers

Using a supplier assessment process to vet and approve suppliers will help your business shorten the time to find a reliable partner for making one-time purchases or starting long-term relationships. This approach will guarantee cost effectiveness and high quality of the products supplied as well as environmental sustainability and occupational health and safety compliance on behalf of your vendors or simply having their corporate social responsibility policy aligned with your company values.  An ISO 9000 certificate is a good starting point to identify a potential supplier with consistent quality service requiring less inspection and testing and perhaps an opportunity for running commercial operations at low risk.

Zvezda Drencheva

 

Source: BMS Associates - Ben Schlussel, 2017

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Inventory Optimization

73 ways to reduce your Supply Chain Inventory making your organization more profitable and your customers happier

Source: BMS Associates - Ben Schlussel, 2017

About the Author

Being in a manufacturing, assembling, distribution or repair service function- the inventory mix is the trade-off between smooth operations supporting high service levels and frozen capital accompanied by increased carrying costs. The solution is obvious- inventory optimization.

To achieve this goal, we will be exploring opportunities in Procurement, Shipping and Receiving, Storage, and Production as well as in the planning and inventory transactions.


16 Opportunities in Procurement

May 23, 2018

#12 Design & Implement Supplier Rating system

Developing a supplier rating system would allow your organization to evaluate your suppliers by applying consistently the same criteria for measuring their performance.

Implementing a supplier scorecard would also give you an opportunity to identify your best suppliers based on predetermined metrics and encourage the top suppliers with extra benefits. The main goal being - clear requirements towards suppliers that contribute to both improved customer experience and profitability.

 

April 10, 2018

# 11 Establish frequent, small lot deliveries

As Lean manufacturing and process management are proving their efficiency, JIT – just in time and small lot deliveries are an established pull method that requires small work-in-progress and final product inventory while providing flexibility and quick response to changing needs.

In addition purchasing in small lot sizes may increase the product’s quality, improve the traceability (as it makes it easier to count and prevent from potential shortages) and lead time but usually results in more traffic and increased transportation costs.  

Therefore the calculation of the economic order quantity for your product type that gives the most optimal lot size for a given demand period with minimized setup and holding costs, would be the best solution for your operations and customers.

 

March 28, 2018

 

#10 Freeze short term production schedule 

 

The stability or the nervousness reduction of the short term production schedule will improve productivity and the total costs however a long-term freeze in MPS results in poor service level and unfavourable inventory. Therefore the desired state is to find the optimal length of the re-planning interval and the time fence of the frozen zone.

 

March 21, 2018

#9 Review “Call Complete” policies and tools

Review all the open lines ordered from suppliers on a regular basis (being every quarter, every 6 months or once a year) and empower your buying or expediting teams to close lines that are shipped partially at 90% of the total ordered quantity or above. This will help the forecasting with real on-order numbers that are expected to arrive and will improve the accuracy of the overall on-order stock.

You might be able to set up your system to trigger reminders for review after choosing an aging period of the on-order lines.

Make sure you create a clear procedure and everyone involved is properly trained so that there are no confusions on your end or at the supplier’s, about open lines that are still due for inbound delivery.

 

March 12, 2018

#8 Purchase based on Enterprise Resource Planning systems

Your modern ERP system is an integrated tool that supports the core business processes across the multiple functions of your organization from customer service and sales, through finance, HR, purchasing and planning to production and distribution. It compiles data that would have been supported on otherwise incompatible databases and enables internal and external stakeholders such as Customers and Suppliers to use the same information in real time.

For complex purchases and independent demand, leave to your experienced buyers to make the final purchasing decision using the support of your customized, e-commerce enabled system enhanced with business intelligence functionalities and fast reporting tools.

Through a well-designed ERP platform, your supply chain management benefits from unified insight into sales, improved demand forecasting, better stock visibility - including this of your partners, synchronized production, optimized stock levels and on-time deliveries.

Feb 28, 2018

#7 Eliminate unnecessary levels of approval

Empowering buyers to make purchasing decisions up to a certain dollar value that makes sense for the business and reducing bureaucracy, pays back in improved purchase order processing times, better engagement from the purchasing team and willingness to understand the bigger picture of the organization and their role and responsibilities in the overall process.

This strategy, if applied at optimal levels, which will vary for every business and will commensurate with the total organizational spend and the hourly compensation of the approvers, will also reduce the operational costs incurred during the requisition procedure.

 

Feb 19th, 2018

 #6 Buy from suppliers that are “close”

Depending on your goals and your unique business needs you should consider buying from suppliers who are located closer to your facility in case that you have a time-sensitive highly specialized product with fast turnaround.

Reduce transit times and lengthy customs and imports by purchasing from domestic suppliers who you could meet in person if something goes wrong without long hours of travel.

This is a proven strategy for shortening the chain and avoiding risks related to quality, labour standards, intellectual property protection and environment. By maintaining good long-term relationships with suppliers next door, you are prepared for the unpredictable and are more likely to have a partner on your side in times of crisis.

 

Feb 5th , 2018

 #5 Enhance information flow, reducing “time”

In today’s dynamic world, reducing the time the information flows translates into time savings, shorter ways for transmitting the message and getting the work done. In the inventory management context, the speed of the communication is important between the distribution center and the purchasing unit as well as between the supplier and the customer. By enhancing the information exchange you are enabling improved cross-functional communications, shorter turnaround times and achievement of win-win results for all parties involved.

 

Jan 23, 2018

 #4 Don’t buy parts, buy capacity

Large capital expenditures are difficult to justify and manage especially at early stages of product development and introduction into the market under risky conditions. Instead of owning the equipment or outsourcing the required work, consider the opportunity of renting the equipment in order to meet your manufacturing needs.

This approach will give you a competitive advantage in terms of time, cost and flexibility to adapt to change while you are keeping your significant process know-how under control and retaining your expertise in house.

 

Jan 16, 2018

 #3 Reduce supplier lead times

Discussing the reasonable lead times for your business with your vendors could allow them to make adjustments in order to meet your expectations wherever it is possible. In addition, providing your suppliers with an estimate of your future demand would help them to forecast the expected quantities you would order and therefore reduce their lead times to serve you better. From your perspective, the shorter the lead time, the lower level of safety stock you would need for covering demand through lead time. This not only reduces the risk by leaving less time for fluctuations in demand and supply but also drops the inventory holding costs and results in improved profitability.

 

Jan 7, 2018

#2 Eliminate “risky” procurement items from NPD&I such as “Sole Source”

At the New Product Development and Introduction stage while supply works with engineering to determine specifications and with operations and finance to meet volumes and frequency of deliveries and reach cost effectiveness, we must recognize the strategic importance of having multiple possible suppliers meeting the technical and quality requirements for critical materials or components. This will provide us with protection against uncertainties of supply, help our contingency planning and will ensure our flexibility in terms of levels of buffer inventory, acquisition cost and availability of substitutes in case of disruptions at our main supplier.

 

Jan 1, 2018

#1 Include Suppliers in New Product Development & Implementation

By involving your supply partners at the design and early implementation stage of your products, you benefit from package sizes and shape better suited for transportation and storage. This could turn into a powerful space-money saver.

Proper packing ensures safe operations and no damages or loss of your goods.

The shape and solidity of the packages is not only designed to protect the entirety of the product and its characteristics but also to prevent from damages during handling, transit and storage. The dimensions of the packing boxes should be conceived to help building stable pallets by making optimal use of the area and volume capacity of the standard pallet size and avoid empty spaces and crushing of bottom layers. Consider all your stacking options and use overlapping patterns when choosing to use one or different box sizes. In order to achieve better stability, strength and density of your shipping unit, make sure your boxes are full, with no air in them, distribute weight evenly and avoid overhanging and misalignment when stacking.

 

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