In very simple terms, A is the inventory that is used the most, B- is products that are important but are used less frequently, and C these are products that are rarely used. Using Pareto ABC analysis will help determine which inventory is used most often. ![]() And try to work with production folks to reduce this manufacturing lead time! 3. The best way to know what your actual manufacturing lead time is is to measure the time when the work order is released and when it is completed or if you have lean experts in the business performing the value stream mapping. If you don’t trust me, try it for a few items and you will see! However, I must admit this is one of the most difficult inventory reduction strategies to implement. In that case, MRP will only ask you to release the work order 5 days before it is supposed to be completed for sale or subsequent operation, therefore reducing WIP inventory by 15 days! So, suppose you reduce this lead time of 20 days to 5 days in your MRP system. Similarly, MRP will ask you to release the work order 20 days before it is supposed to be completed for sale or subsequent operation and will be driving 20 days’ Work in Progress (WIP) Inventory. For example, if you are using MRP and have 20 days of manufacturing lead time, it will take this 20 days into account to order raw materials for a given supplier lead time. When considering the planning method, you should consider manufacturing lead-time in the total planning lead-time. ![]() Whilst I have seen a lot of focus in reducing the total supply chain lead-time and/or supplier lead-time, there is, however, not enough focus in reducing the internal manufacturing lead-time. I have found this exercise very useful to present visually to the team involved to show how much inventory we should be carrying at each stage of the supply chain. Starting from upstream of the supply chain and mapping out the average lead-time to downstream of the supply chain. The easiest way to understand total supply chain time is to perform high-level supply chain mapping. This, in turn, will reduce the risks related to holding inventory for longer periods. To reduce lead time, the throughput, WIP, and cycle time will need to be measured to get a realistic estimation of a reduction in lead time. Reducing supplier lead time and manufacturing lead time will contribute to inventory reduction. Here is a List of Inventory Reduction Strategies you can Try to Improve Inventory TurnsĪ reduction in total supply chain lead time will lead to products/materials not being held in stock for a long time. ![]() To help SCMDOJO Community we have developed an Inventory Optimization Tool in Excel that will do all all the optimization work for you in minutes & hours rather than days. Therefore, identifying inventory reduction strategies becomes critical for supply chain and operations professionals.Įfficient inventory management balances benefits and drawbacks, ensuring business success and survival. However, maintaining inventory also involves holding or carrying costs along with opportunity costs. A lot of cash flow is committed to inventories so as to ensure a smooth flow of production to meet a demanding customer service level. Inventory comprises an important part of current assets, particularly in the manufacturing industry. Continuous Improvement Inventory Management Supply Chain Strategy.
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