LOWER SUPPLY CHAIN COSTS

There are steps to identify and eliminate surplus inventory from a network that would improve efficiency and lower overall supply chain costs.

1. Reduce lead time. Internal contributors to lead time include order creation, inbound order receipt, and reorder check times. Any reduction of the time needed to perform these functions will assist in reducing overall lead times. For international shipments, significant delay can occur at customs and roughly 90% of these delays are attribute to administrative errors. A lot of this interruption can be avoided by creating a clean process that ensures the proper paperwork is being delivered the first time. This will reduced the amount of rework needed and will take valuable days out of global lead times.

2. Effectively manage on-time compliance. After working with suppliers to reduce them, it is essential to agree with them on specific standards that are developed on an origin-to-destination basis. Once an agreement is made, it is incumbent on your procurement and operations managers to hold suppliers and carriers responsible to those agreed-upon standards. Managing each vendor and carrier by real data and requiring a high level of accountability will help ensure that extra inventory is not creeping into your network to buffer against unreliable service.

3. Order more frequent. By ordering more often in fewer quantities, you can effectively cut the amount of cycle stock inventory in your facilities. When this is accomplished, max inventory levels for each item are lowered, resulting in freed up space for other products. This is a particularly successful strategy for domestic suppliers that have shorter, more predictable lead times. It is difficult to take inventory out of transit for these suppliers so focus on approaches that require less of that inventory in your warehouses.

4. Optimize your design network. In multiple-echelon operational networks across large geographical areas, significant inventory reductions can be made through network design optimization. The fewer stocking facilities used the better, as safety stock inventory is proportional to the number of warehousing locations.