Avoiding The Costs Of Too Much Inventory

In all business sectors the level of stock being held is usually too high. Whether the problem is excess, surplus or redundant materials the costs involved can be very large and include ongoing storage and maintenance costs as well as lost opportunity costs for the capital tied-up.
 
The decision whether or not to have items immediately available ‘on-site’ should be based on business-risk considerations – readily recognised by senior management.
 
Staff involved in the inventory decision-making activities are frequently unaware of how to convert the basic principles into working practices that can achieve lower levels of stock yet still meet the company’s operational needs. Even when stockholdings are justified, decisions about the quantities to be held are frequently made on pessimistic grounds ‘just in case we need them’ and without true regard to the business rationale.
 
Course Objective:
The objective of this intensive 3-day course is to identify ways by which excessive stockholdings can be avoided, whilst still providing the required service level to user departments. This will help to increase the company’s profitability and its level of customer service

Course participants:
This 3-day course is intended for:

• Any staff members  who select items to be added to the inventory
• Inventory control staff who monitor stock levels & initiate stock replenishment actions
• Purchasing staff responsible for the supply of stock items
• Staff that have a Planning role in the company’s operational / production departments
• Finance staff who would benefit from an introduction to Inventory Management principles

At the end of this course participants will be able to:

• Contribute to development of Inventory Management policies
• Identify opportunities to reduce the need for stock holding
• Make informed decisions regarding a wide range of options for supplier relationships and supply agreements
• Be familiar with the Stock Decision tree and its practical application in their own environment
• Contribute to risk management decisions regarding inventory
• Understand Inventory Management theory

Course contents will include:    
 
The Business Rationale for holding items in stock

• Setting a stock-holding policy – based on likelihood, consequence & supply time
• Costs of stockholding 

 
Factors that avoid the need for stockholding, yet still meet customer demands

• JIT – in manufacturing / planned operations
• Maintenance by equipment supplier inc spares etc = ‘service’ rather than ‘purchase’
• Supplier-managed inventory – service costs offset by reduction in stockholding costs
• Spares & consumables by maintenance contractors
• Inventory accuracy

 
Deciding quantities to be held in stock – factors to be considered

• Service level requirements – realistic expectations
• Number crunching exercises using historical data, including EOQ

 
Managing the inbound supply chain

• Supply agreements with reliable suppliers – known delivery times for on-spec. supplies

 
Internal factors that help reduce excessive stock levels – methods, procedures & systems

• Processing of ‘stock proposals’
• Standardisation & variety control Policies on “reserve” stocks
• Policies on “reserve” stocks
• Stock “sponsorship” and accountability by end users
• Planning of demands / scheduling of requirements
• Automating the stock replenishment process

 
Measuring Inventory Management performance

• A range of metrics – also basis of discussion with delegates