TEN WAYS TO IMPROVE INVENTORY MANAGEMENT
CFOs and other senior executives already know the importance of inventory management. And yet even the most attentive managers often find it difficult to get it right. In our work with clients, we've found that decision makers often rely on external benchmarks that seldom deliver expected insights. And they make operating assumptions that send them down the wrong path. Two of the classic misconceptions: improving the accuracy of sales forecasts is the best way to reduce inventory and beefing up customer service requires keeping more inventory on hand. The fact is, both assumptions can lead to inventory gluts or shortages.
As most executives know, getting the right levels is vital since it not only controls costs but also serves as a barometer of a company's overall health. We've found that best in class supply organizations are able to improve inventory levels by between 20 percent and 50 percent by employing sophisticated analytical tools, resulting in savings for years.
We typically ask clients 10 questions that take the pulse of a company's inventory health. They are designed to assess the effectiveness of inventory reduction processes as well as the sophistication and breadth of those efforts.

Taking an Inventory Pulse Check

1) Are you able to break down your operating inventory into the three major categories when reporting levels—safety, replenishment and excess or obsolete stock?

This breakdown makes it easier to make sound decisions about appropriate levels for each of these three areas. It helps determine the minimum safety stock needed to provide an insurance policy against supply chain problems either from manufacturing glitches or distribution uncertainties so that customers get what they ordered. It's useful for pinpointing the amount of inventory required to replenish deliveries every two weeks. And it helps