Stock Optimization
Stock optimization - always in focus
What you have in stock is always in focus. On one hand it makes is possible to meet your customer’s service requirements but on the other hand also represents capital bound in stock. In a time of international crisis intensifies focus on improving the stock on hand through the entire supply chain without sacrificing the service levels to the customers.
There are more challenges than capital bound in stock and customers service level
High capital bound in stock and low service to customers are well-known challenges for all businesses. In addition you could find, that it is the wrongs products that are in stock (and have been there for some time), leading to depreciations due to obsolete stock and have a negative impact on the earning of the company.
There are many reasons as explanation
The market requirement for new products can lead to a large and rapid growing product portfolio, maybe in combination with less successful new introduction. On top of this you may have an insufficient cross functional planning (ex. regarding forecast) from sales to production where you don’t reach consensus about a common plan.
Trying to treat all customers and product alike will normally increase the problem as well as acting on a global supply chain with longer lead times and larger batch sizes, which you have to take in to account in your inventory planning.
There are several options to solve the problem
In order to deal with the problem it is often necessary to use several different elements at the same time to ensure the best impact
• Use stock policies for both raw materials and finish goods (ABC controlling) so that the right products in the right quantities are in stock. Product portfolio management supported by a product pruning process in order to keep the number of products to a minimum will support an efficient inventory with a high turnover
• Implement a cross functional planning process focusing on balancing forecast and supply to begin with a set up that match the ambition for the company. This can developed to a real S&OP process in a later stage.
• Improve collaboration with suppliers (bonus models and share forecast) in order to reduce delivery time and batch sizes. Same issue in case you have your own production
There are often good opportunities for improvement
The potential is obviously depending on the starting point for the company, but in general there will be an impact in relation to
• Improved customer service which have to be fixed in order to increase turnover
• Reduced capital bound in cost as well as reduced supply cost, all improving the company earning
How do we do it
The first step is always to identify the problem. Next step is based on the situation for the company to use all available data, present KPI reports, knowledge about the company business model and processes in combination with our experience from similar cases to create the right solution for the company. And as always it will be done in close cooperation with the people from the company.