This week we will recap 10 ways to save inventory dollars using a theme from the David Letterman Show.
Paul's Top Ten Ways to Save on Inventory
- Understand the elements of carrying costs. See Chart Below
- Eliminate excess and obsolete Inventories
- Improve the accuracy of your demand forecasts. (This is done with automated purchasing forecast technologies)
- Lower the operating costs of the warehouse by improving processes. (Efficient picking documents and “warehouse routing” of pickers are some simple processes to fix.)
- Use your vendor’s inventory to order just in time where possible. If feasible “drop ship” larger orders you never touch the inventory.
- Improve your data accuracy if you don’t know how much you have or where it is, it’s as if it doesn’t exist.
- Implement cycle counts and practice them like a new found religion.(Covered in a previous article in detail)
- Reduce your lead time. Don’t put it on the floor unless you plan to do something with it. Press vendor to deliver more often.
- Increase the velocity of your operation- Replace a 6 day lead time article with a 2 day lead time item. If you have an out of stock situation, it is only for 2 days. Sounds simple but have you looked at your velocity lately?
- Clean your attic, increase turns on items to increase profit. If your carrying obsolete or old inventory because you might lose customers you have bigger problems that the top ten list can’t help.
