Excess Inventory – A Key Challenge For Manufacturers

Excess inventory is a waste that leads to other challenges for all manufacturing businesses, such as wasted space, movements, transport and potential rework or scrap.

Determining the ideal amount of inventory can be a difficult exercise. As a result most manufacturers build “buffer stock” or ‘just in case” stock to ensure their customers demands are always met, protecting the business from unexpected delays and break-downs.

Determining the optimal level of inventory requires any business to look at usage versus replenishment lead times. For example, if a particular part is used 50 times per day and the lead time to get replacement stock takes 4 weeks, then the minimum stock quantity before reordering becomes 50 pieces x 20 days = 1,000 pieces.

Determining the maximum level of stock requires evaluating the space available for storage versus the most efficient ordering cycle. It may be more efficient and cost less to order the above parts as one delivery of 1,000 pieces at a time. Obviously some “safety margin” will be required to allow for potential delays or increased demand but the Just-In-Time principle is to keep this to a minimum.

As stock usage can vary depending on customer demand, it is important to make the re-order point visible and set up a “trigger” to alert the purchasing or supply person that it is time to reorder or replenish.

The SER® team can assist with your inventory calculations and re-order cycles to assure that stock and inventory levels are maintained at the optimum thus reducing potential wastes and costs for your manufacturing business.

For more information contact your local SER® representative. If you haven’t registered for an SER® click this link: http://steelefficiencyreview.com.au/register-now/