7 Inventory Reduction Strategies

6/9/18 6:28 PM

High inventory has its advantages and disadvantages. On one hand, you have product ready to go at a moments notice. On the other hand, your holding and carrying cost are increasing every second. Reduction Inventory Strategies As these challenges are presented, operations managers are all asking the same questions - how do we effectively reduce inventory without hindering production? This is where locating the correct inventory reduction method comes into play.

7 Methods of Inventory Reduction

Finding the correct strategy can be vital to reducing inventory, but there are various methods to be considered. Thoroughly analyzing each strategy and finding the one that best suits your production facility will allow for an optimized manufacturing operation and an increase in revenue. These 7 methods of inventory reduction include the following:

  • Inventory Auditing - Before implementing any methods, examining the inventory thoroughly is a must. Locating the areas where inventory is out of control promotes insight and intuition and lead to answers about inventory reduction.
  • Enhance Demand Forecasting - Demand forecasting is a challenging component within a supply chain. Considering that demand can change at a moments notice, having an accurate system is vital. This is how production facilities are able to actively combat swift demand changes. An integrated system and data accuracy will allow for inventory reduction through planning for the amount of product that is needed.
  • Manufacturing Supply Chain Time Reduction - Reduction of supply chain lead times such as manufacturing and supplying will lead to inventory reduction. This calls for a measurement of factors such as throughput and cycle time for there to be able to be an approximate lead time reduction. As this method is carried out, inventory and holding cost will be cut back dramatically.
  • Supplier Affinity Enhancement - Suppliers are extremely important to manufacturing operations - after all, they control the materials needed. Faulty communication can lead to a loss of information and conciseness needed in order to get exact orders, therefore establishing an excellent relationship with your supplier can optimize production and reduce inventory through a more efficiently flowing network.
  • Order Size Reduction - Large, infrequent orders for a varying demand can lead to high inventory. Keeping orders small and frequent benefit the company through reduction of inventory and cash flow management. The more inventory on hand, the more holding cost will be and also increases the risk of product depreciation.
  • Flexible Components - Locating materials that can be utilized in a variety of ways can benefit the production facility enormously. With production, waste is prevalent, therefore finding a material that is able to be placed into several products can reduce waste and inventory.
  • Implementation of Measuring System - Utilization of an MRP or ERP system that is qualified for a manufacturing operation lead to overall optimized production, which develops a plan for factors such as inventory. Accurate demand forecasting and an integrated system can further reduce inventory and cost within a production facility.

These strategies can not only optimize your manufacturing operation, but will also increase the amount of revenue the operation is generating by reducing overall inventory cost.

APS and Inventory Reduction in the Manufacturing Industry

Inventory Reduction Strategies

Inventory planning is a component within advanced planning and scheduling (APS) systems. Utilization of capabilities such as simultaneous capacity and inventory planning, cross-plant optimization, and in-memory planning can benefit your manufacturing operation tremendously, with other benefits and capabilities of APS including:

  • Optimized Capacity Plans - Know forecast load-versus-capacity including equipment, tooling, and labor constraints. Optimize automatically to maximize KPIs.
  • Capacity Scenarios - Evaluate abilities to meet variable forecasts. Define time-phased capabilities to simulate evolving equipment or skill extensions.
  • Enterprise Capacity Visibility - See workload and capacity at any level: company-wide, plant-by-plant, departmental, or even down to the resource.

Integration of an advanced planning and scheduling system allows for your production facility to be able to meet its full potential by efficiency, improving data accuracy, and optimizing overall production.

Related Lead-time Reduction Video

 APS Resources

Topics: Advanced Planning and Scheduling, capacity planning, PlanetTogether, JIT, Kanban, MRP, enterprise resource planning, Material Requirement Planning, Capacity Modeling, challenges in supply chain, inventory reduction, materials planning, Industrial Distribution


Download the APS Shootout Results


PlanetTogether APS: A GPS System for your Supply Chain - See Video

Recent Posts

Posts by Topic

see all
Download Free eBook
Download Free APS Implementation Guide
Download Free ERP Performance Review