Page 18 - Logistics News June 2016

inventory management

Overcome your inventory

turnover challenges

Acknowledgement to EasyStock

“ Our inventory turn rate is only three times per year,
our competitors are at five.
”We should be able to turn around our inventory
five times as well! Make it happen!
- Your Boss

THIS IS when the inventory
reduction carousel starts.
What’s the easiest way to
lower inventory? It’s of course
by reducing the stock level on
the medium and fast movers.
The inventory reduces and
you achieve the five turns
per year. The big question is,
at what price? When taking
this approach your expedited
purchasing costs go up and
service levels go down.

Why does this happen?
Because there was a focus
on a single supply chain key
performance indicator (KPI),
in this case the inventory
turn rate. This is not too
uncommon in most companies
and it can easily happen if a
single problem rolls up to the
management radar without
them seeing the bigger KPI
picture. Inventory reductions
can’t be managed in a vacuum
and inventory control can’t
be done independently of the
other variables and KPIs in the
supply chain.

Why is the boss watching
inventory levels like a hawk?
Because it shows up directly
on the company’s financial
reports in a very negative
way. There’s no line item on
the balance sheet for tracking
target service levels or
forecasting accuracy.

16 June 2016 | Logistics News