20 Expert Tips & Strategies on How to Reduce Inventory
Why is reducing inventory important? Well, most companies estimate inventory carrying costs between 20% and 35% per year. Inventory takes on a lot of different identities within a manufacturing company, depending on who’s doing the looking. An accountant sees inventory as an asset, a controller sees it as a liability, a production supervisor considers it a safety net, while a materials manager finds it a tightrope.
One common aspect of inventories that everybody agrees on is that holding it can be costly. Here are 20 ways to reduce inventory:
20 Ways to Reduce Inventory
1 – Improve forecast accuracy.
2 – Re-examine service levels.
3 – Address capacity issues.
4 – Reduce order sizes.
5 – Reduce manufacturing lot sizes.
6 – Reduce supplier lead times.
7 – Reduce manufacturing lead times.
8 – Improve supply reliability.
9 – Reconfigure the supply chain.
10 – Reduce the number of items.
11 – Eliminate questionable practices.
12 – Dispose of obsolete inventory.
13 – Convert obsolete inventor into current inventory, then sell it. It may require changing components to bring the product up to current specifications.
14 – Return the product to the manufacturer for credit, especially if you are a significant customer. Restocking costs can be less than carrying costs.
15 – Sell obsolete inventory to present users. Run a list of all users of the product and offer to customers at a discount.
16 – Open an employee store.
17 – Open an outlet store.
18 – Use an online outlet.
19 – Sell parts as spares.
20 – Export the product.
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