Inventory Cost Reduction
| |
Save Now & Later
Finding inventory savings in complex supply chains without impacting customer service requires experience and advanced methods.
Once identified, inventory reduction opportunities:
- Are quick to implement
- Immediately free-up working capital
- Provide ongoing month-to-month expense reduction of acquisition and holding costs
|
Inventory, one of the few functions integral to daily operations for virtually all businesses, almost always has the potential for short-term expense reduction.
Anything other than the right products, in the right places, in the right amounts, at the right times is a financial opportunity.
What We Do:
Armed with knowledge of your on-hand inventory (regardless of how, when, why or at what cost it was acquired), as well as your current inventory management and buying policies, we:
- Analyze non-performing inventory on-hand and on-order.
- Identify sub-optimal inventory management policies for deployment, cycle stock, safety stock and SKU rationalization.
- Investigate excess inventory holding cost rates (storage, shrink, loss, obsolescence, etc.).
- Isolate high forecast error and ineffective forecasting practices.
- Investigate how inventory performance is measured to ensure continuous improvement.
- Prioritize opportunities to maximize the economic return from inventory reduction initiatives.
Our Inventory Cost Reduction (ICR) service yields quick results with little or no investment. We help you:
- Reduce inventory while maintaining or improving customer service.
- Find and resolve non-performing inventory to best advantage.
- Realize savings of 15-60 days of supply beginning in as few as 2-3 months.
- Improve SKU stock-outs and order fill rates.
Our ICR service attacks your inventory issues with the right initiatives. You reduce costs and improve service simultaneously.
Business Opportunities |
Solutions |
Typical Benefit* |
Sell it sooner
|
- Develop cost-effective reverse logistics and transfer techniques to re-position dormant inventory to where it will sell sooner
- Initiate sales promotions, both your own and in cost-sharing collaboration with others
- Re-brand, re-package, re-process or re-work, etc.
|
15-30% |
Hold less
|
- Order less, but more frequently
- Negotiate required minimum order quantities at the supplier level
- Use statistics for safety stock to maximize customer service with the lowest inventory OR to maximize profitability
- Maximize the use of return privileges
- Deploy inventory as far upstream as possible consistent with delivery time commitments
- Use accurate lead times to reduce early receipts
- Coordinate the drawdown of old SKU inventory with the creation of new SKU inventory
- Negotiate increased supplier inventory levels in return for other supplier preferences
|
20-30% |
Own less of what you hold |
- Re-negotiate payment terms in return for things that help your suppliers
- Let your key vendors manage their portions of your inventory
|
5-15% |
Reduce inventory
holding costs |
- Reduce costs of ordering, receiving, paying and storage and minimize shrink, damage and loss
- Accurately reflect the acquisition costs of hard-to-receive SKUs
|
5-10% |
Plan demand more effectively
|
- Identify and address sources of high forecast percent error rates
- Investigate sources of large unit forecast errors
- Forecast new SKUs and purchase in the context of past SKU introductions
- Share your forecasts with key customers and request their input
- Create robust SKU creation and discontinuation decision-making processes
- Use Sales and Operations Planning (S&OP) to make effective decisions
|
10-20% |
Measure progress
|
- Measure, report broadly and review inventory performance regularly in both financial and customer service terms
- Measure, report and expect increasing levels of performance from suppliers
|
5-10% |
If you must, liquidate to best advantage |
- Liquidate as far upstream as possible
- Maximize cash value consistent with brand protection strategy
- If there is low revenue opportunity, use donation to maximize tax advantage
|
5-10 % |
* Reduction of working capital, acquisition and holding costs, days of supply, etc.
and increase in annual inventory turns
Learn More
To learn more, please complete our Information Request form.
Inventory Management: Minimizing Cycle Stock and Safety Stock for Increased Shareholder Value
Visit the inventory management page for more resources.
Solving the Cost Reduction Riddle
For a complete overview on aggressive, intelligent supply chain cost reduction on all of the Buy-Make-Move-Store-Sell-Return elements of the supply chain, read the article "The Riddle of Supply Chain Cost Reduction" by CEO James Tompkins.
There are significant cost improvements that can be accomplished with little to no capital investment and with minimal resources. For detailed information, see what top performing companies are doing in areas such as transportation, inventory and outsourcing.
Bottom Line Impact Now:
Ways to reduce costs in specific sectors.
Five Key Opportunities to Reduce Distribution Costs
Three Key Opportunities to Reduce Transportation Costs
Food and Grocery Industry Cost Reduction
Cost reduction in supply chain technology for the food industry in this article from Food Logistics magazine.
White Paper on the Retail Industry:
Download the white paper: "Sourcing and Selling in Challenging Economic Times: How Retailers Should Re-think Their Operations and Methods."
|
