Reducing Supply Chain Costs: Inventory, Tompkins Associates

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 Cost Reduction

Today’s economic environment demands that companies must examine every opportunity to improve the financial and customer service performance of inventory at every supply chain link.

Companies are now operating under new business realities that place all costs under the spotlight, particularly those that can be impacted promptly.

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.

Solving the Cost Reduction Riddle

For a complete discussion on aggressive, intelligent supply chain cost reduction on all elements of Buy-Make-Move-Store-Sell of the supply chain, see this article by CEO James Tompkins.

Bottom Line Impact Now

Articles on ways to reduce costs in specific sectors.

Five Key Opportunities to Reduce Distribution Costs

Three Key Opportunities to Reduce Transportation Costs

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