Reduced inventory costs

The methods employed to manage inventory have a significant impact on the profitability of a company, namely net profit margin and return on assets. For most companies inventory is their largest single investment asset.

The competing decisions on ‘how much’ inventory to hold to support customer demand versus the costs in administration of inventory and the holding of idle inventory, is a historical paradox still challenging many companies.

The symptoms of poor inventory management are;

  • Increasing customer dissatisfaction i.e. out of stocks, back orders, lost sales.
  • Low stock turns particularly on imports, B & C class SKUs, promotions and investment buys.
  • Inventory accuracy increasing labour costs i.e. productivity and rework.
  • Increased working capital is invested in inventory.
  • Operational capacity constraints due to extreme inventory holding.
  • Increasing quantity and value of obsolete products stored.
  • Increased annual inventory carrying costs. (can vary between 20% to 40% of the value of the product)

Balancing the competing and influencing inventory decisions that are independently managed by different business units requires an integrated approach.

Performing an inventory assessment can incorporate a full and detailed evaluation on managing inventory throughout your company or, alternatively, it can centre on a specific area of concern.

The company’s existing inventory principles, methods and IT systems employed across all stakeholders are evaluated and compared to Global Best Practice with resultant recommendations.

Our specialists have experience in evaluating, developing and implementing improvements such as;

  • Cyclical counting methodologies and system reporting
  • (IRA) Inventory Record Accuracy procedures and reporting
  • SLOBs (slow moving and obsolete) response program
  • Planning promotional and peak season inventory
  • Inventory forecasting and procurement decision support technology
  • Economic order quantities, “Safety” stock
  • Inventory training and education program
  • ABC classification analysis and effective decision making
  • Critical value analysis and effective decision making
  • Measuring inventory carrying and administration costs
  • Evaluating and benchmarking the effectiveness of a company’s approach to management of inventory