3 6 Reasons Why People are Laughing at Your Inventory Reduction Methods
Trying to introduce inventory reduction methods in a functioning assembly environment can be difficult to accomplish on your own. Usually, the trial and error method produces, comically, many more errors than successes, and risky manufacturers who attempt them may find themselves the “butt of the joke.” But fortunately, where other production companies have pioneered and failed, you can learn by observation.
The reason that these techniques invoke amusement in outsiders is the simple fact that they don’t work.
This list of inventory reduction failures may seem absurd, even a trifle ridiculous at first, but rest assured, these and others haven’t simply been attempted to provide comic relief, they were conducted as a valiant effort to keep actual production costs within very slim profit margins. Moreover, with so much capital represented by and tied-up in inventories, it’s no wonder that production companies would try any new method that might reduce inventories. Incidentally, if you’ve tried them yourself then you’ll understand that the laughable results were at least productive in illuminating what not to do.
Usually the first inventory reduction method that manufacturers will attempt entails simply reducing the quantities of consumable parts at their facility by ordering less than is typical, or decreasing safety stock. And while this strategy may produce an immediate reduction in inventory amounts, it really does nothing to diminish inventory costs. In fact, most manufacturers who try this technique just find themselves having to issue and manage even more shipments of parts, and struggling through an increased number of stock outs that generate work stoppages and other production woes.
Reason 1: Decreases Administrative Efficiency
Reason 2: Increases Stock-out Occurrences
Negotiating Smaller MOQ’s
Most manufacturers believe that price breaks on large orders of consumable parts are inviolate, but other go-getters have hit on the idea of trying to negotiate minimum order quantities with suppliers to lower their inventory amounts. If you’ve tried this inventory reduction method then you understand the additional administrative costs that this technique engenders, far outweigh any temporary relief gained by working with scores of additional suppliers. In addition, the resulting amounts of new and different part numbers and supplier classification codes can increase inspection times at receiving, and stocking and picking procedures.
Reason 3: Requires Large Amounts of Labor (Time Spent Negotiating/Receiving)
Reason 4: Generates Picking Confusion (Small part Confusion)
Orchestrating Lean Inventory Practices In-house
Many production companies believe that their own management staff can orchestrate lean practices within their procurement procedures, like a just-in-time replenishment plan, with a variety of different suppliers. But the results of this type of inventory reduction method can be disastrously expensive and complicated, generating not-so-hilarious outcomes that involve PO and tracking problems. Even more costly is the outlay for the required scheduling system for compatibility that will enable data transfers.
Reason 5: Way Too Expensive
Reason 6: Possible Compliance Infractions
To implement real inventory reduction methods in any manufacturing environment, the lean manufacturing strategies that were developed by those who have pioneered and succeeded in creating maximum efficiency with zero waste, work in conjunction with a single supplier (or, very few suppliers). These inventory reduction methods can actually produce the cost saving and efficiency benefits that you desire for your operation, but only when implemented through a customized VMI program that includes the integration and maintenance processes.
Custom vendor managed inventory plans are not only effective for reducing inventory costs; they also incorporate other lean principles which eliminate additional areas of waste, such as in work flow inefficiencies and compliance procedures.
With a customized VMI program that includes one or more inventory reduction methods designed specifically for your facility, you can realize significant and amazing improvements in all of your quarterly performance reports… which is a situation that no one could scoff at and you can laugh all the way to the bank.