Making logistics inventory management work for your company
December 25th, 2009 | by admin |Many experts believe that a successful supply chain management is based on the efficient logistics inventory management of inventories and inventory control. Different industries manage their inventories in a different way. Depending on the inventory management your company employs, expect to incur varying degreey of inventory costs. Understanding factors that affect this costs will help you decide whether to keep a large or small inventories.
In a way, food companies are quick to embrace a logistics inventory management strategies to reduce costs compared with the agribusiness industry. The Efficient Consumer response was introduced by several food manufacturers and grocers almost 20 years ago to move away from controlling logistical costs to examining supply chains.
The industry also realized then the importance of customer service as a crucial competitive differentiation point for firms which are focused on value creation for end consumers. These companies have also learned to distinguish inventories into cost reduction and improving customer service.
The idea is to have a balance of inventories and solve the problem of maintaining a large inventory (which can lead to huge expenses) as against having too little inventory (which can also result to lost sales).
Most companies believe that reductions in inventory could result to reduction in costs in supply chain management. A significant drop in inventory costs have been reported by many companies since 1982 totalling 60% reduction, as well as a 20% drop in hauling costs. Because of the experience in cost reduction, many companies have resorted to push for inventory-reduction strategies in their supply line. To effectively draft an effective logistical strategy, your operations managers must first fully understand the principles of product demand, inventory costs, and supply chain capabilities.
For an effective logistics inventory management strategy, a company must use one of the three general approaches to management inventory. Step one is to monitor inventory levels by items, such as used by most retailers who use the inventory control approach. To monitor inventories, most manufacturers put more emphasis in the schedule of production and flow management. Third, a number of firms (for the most part those processing raw materials or in extractive industries) do not actively manage inventory.