Appolis, Inc.

Inventory Reduction – 3 Steps to Success through Automation

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By Jim Willems, President, Appolis

Inventory reduction is always a company’s strategic objective, but how can it be done without affecting customer satisfaction and production resources?   Automation systems, like Warehouse Management, allow companies to reduce their overall inventory levels while maintaining the ever important customer satisfaction levels and not negatively affecting labor resources.   The following three (3) steps will allow your organization to reduce the overall capital tied up in inventory.

1. Sales and Operations Planningautomation allows for more real time and accurate data to be utilized by Sales and Operations as they drive planning throughout the organization.   Warehouse Management Systems provide reporting on actual item movement, unnecessary item movement (zero value added movements) and accurate inventory turnover calculations.

Eliminate various SKU package sizes – minimize the number of package sizes available for a given item.   This will need to be done based upon marketing and sales feedback, but operational reporting should provide a good starting point for overall impact to the bottom line.    Automation will catch total order lines processed, time required to pick/pack these items, additional square footage needed to store and process these items.

Bundle Slow Moving Inventory – bundle slow moving inventory with something else.   Drive dead inventory through the system through the bundling with companion items or with faster selling items that will allow for these slow/dead moving items to be processed.

Reduce the number of SKU’s – reduction in the number of sku’s actually sounds easier than it is.   To be successful there needs to be both a well-defined process and internal support from various areas of the company.

2. Improve Production Control – inventory control systems provide real-time data and status that allows floor level personnel to make informed and accurate decisions regarding inventory levels and overall process flow.

Move inventory control to your production staff – allow production staff to control inventory at specified levels through the use of real-time barcoding and tracking system throughout the production floor.    Automation provides real-time accurate data that allows floor level personnel to make more accurate and timely decisions.

Move manufacturing/kitting components to the production point of use not the warehouse – this process change will eliminate unnecessary inventory moves from storage to production.    Eliminating this inventory in the warehouse will free additional warehouse storage space.

Switch from make to stock to make/finish to order – inventory automation allows for items to be made or finished as orders are being processed.  This allows for component inventory not to be tied up in finished goods inventory until the point of need.

3. General Inventory Process Changes – Warehouse Management and Inventory Control solutions allow streamlining and efficiency improvements that reduce both inventory levels and labor requirements.

Double your cycle counting – Increasing the number of items that are counted and the number of times each item is counted will only drive more accurate inventory.    More accurate inventory will then allow for more precise purchasing and higher inventory turnover.   This process is easily managed through barcode automation as these systems allow for very accurate and efficient processing of cycle counts.

Change safety stock levels from optimal (98%+) down to 95% – Warehouse Management systems allow for more accurate and real-time inventory information that increases fill rates.   This increase in inventory data should offset any order effect created by reducing the safety stock levels to a lower level.    This minimal amount of safety stock decrease inventory carrying costs.

Obsolete Inventory Process – Inventory Control applications, like Warehouse Management, allow for more accurate and detailed inventory reporting in terms of actual inventory touches, travel time, non-value added movements and inventory turnover data.   This reporting will allow for obsolete inventory to be identified sooner and more accurately.

I hope these three (3) steps will allow your organization to have inventory where it is needed, when it is needed, and allow you to direct your precious capital investments to where they are needed the most!

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