Decreased Competitiveness: In the age of e-commerce, everyone is competing for customers.Locating lost inventory wastes and an enormous number of man-hours. Productivity Cost: Searching for inventory is not only frustrating but also drags down the productivity of your entire operation. ![]() Inventory-related issues cost managers hundreds of millions of dollars in lost goods every year. Opportunity Cost: Money spent on an inefficient warehouse operation would be better and more profitably spent elsewhere.It’s important to remember standard inventory management does not cover hidden costs, according to Total Trax’s Brian Quigley such as: Understand “Hidden Costs” in the Warehouse Cost Reductions Quest Keep Safety Stock to a minimum to avoid too much Safety Stock: if not managed effectively, this can add to the money invested in Inventory. Try a “pull” system based on demand/customer orders as opposed to a “push” system where you push inventory into warehouse stock to prepare for future orders. Use the Item Master of the ERP System to set inventory turns to six to eight turns, set minimum/maximum inventories, re-order points and lead times. Using your Enterprise Resource Planning (ERP) cloud system to keep track of your inventory levels is the most straightforward way to prevent overstocking inventory and, as a result, reduce inventory cost. This will be a big achievement towards your mission of warehouse cost reductions. You can eliminate physical inventories by cycle counting and sustaining the 98-99% accuracy for months. If you do this with discipline daily, your computer system will output accurate data. Your goal should be 98-99% accuracy daily. Second, after reconciliation, cycle count daily. Too many variations? First, take a physical wall-to-wall inventory. You have to find the root cause as to why there is such a variation. Are they the same? If not, you just can’t change these figures, so they match. Match the number on hand in the warehouse to the number on hand in the computer. ![]() Never assume your inventory is accurate just because your people tell you it is. Understand Data Integrity to Reduce Inventory Costsįirst, data integrity is vital. Too much on-hand inventory increases your storage costs, your cost of goods sold (cogs), and ties up liquid cash. If you are looking for warehouse cost reductions, chances are you are stocking too much inventory. It is not just SKUs, part numbers, boxes or pallets: it is cash, your cash! Inventory cost is defined as the cost of holding goods in stock. A Focus on Inventory Control Begets Warehouse Cost Reductionsįirst, look at inventory as MONEY/CASH. These are based on my 40 years working in operations at Schwinn and other companies as well as consulting many companies on how to select the best 3PL for my client’s needs. Today, I will address how a focus on inventory will allow for warehouse cost reductions as well. Intrieri is a highly experienced and credentialed Supply Chain Management professional and is a recognized thought leader and innovator, primarily in the areas of Supply Chain Optimization, LEAN initiatives, Operations, Manufacturing, Third Party Logistics (3PL) International Purchasing/Importing, Inventory Management and Logistics, Strategic Sourcing, and Procurement Operations. Editor’s Note: Today’s blog post is from Chuck Intrieri. Mr.
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