Part 2 of a 6 Part Series: Building Infrastructure Strength for Future Growth
Each week, we will go into details on how to address project and change management now to create a resilient and robust organization for tomorrow.
If you missed last week’s blog on Cultivating Supplier
Relationships, you can check it out here.
This week, we will look at the 2nd of 6 ways a
company can use downtime to impact the greater good of the organization and
position themselves to be a better, stronger company when the work picks back
up.
Assess Inventory Management
Manufacturing companies often look for the best time of year
to perform in-depth inventory counting and reconciliation. For most, the
holidays are the best time to do so. For others, whatever slow season makes the
most sense will often get utilized. Performing a full inventory check is
time-consuming, but necessary. Ensuring the accuracy of the inventory
management system is critical when planning production for the future. When a count
is off, the risk of not meeting a customer’s needs increases. It’s critical to
identify the best time to review minimum stock levels, simplify the reordering
process, and look at ways to automate processes. In the future, this downtime
filler could be a thing of the past. Businesses utilizing automatic
identification and data capture (AIDC) asset tracking processes are able to
reduce the frequency of manual inventory counts and save substantial labor
hours. That will help free up time to tackle some of the other projects
suggested here. Essentially, the next time inventory is conducted, use it as a
benchmark and then utilize process improvements in order to track enhanced
efficiencies.
Specific Example: ABC Analysis or the “The Pareto
Principle” (The 80/20 Rule)
When it comes to stock or inventory management, ABC analysis
typically segregates inventory into three categories, based on its revenue and
control measures required:
·
A is 20% of items with 80% of total revenue and
requires tight control
·
B is 30% items with 15% revenue
·
C is 50% of the things with least 5% revenue and
indicates more most liberal treatment
The numbers of any particular company may be different but
have a similar distinguishable pattern. An ABC analysis aims to draw managers’
attention to the critical few (A-items) and not on the trivial many (C-items)
and focus inventory control efforts on those particular items where management
will have the most significant effect.
Once an ABC Analysis is complete, companies can use this
data in supplier negotiations. When it’s all about getting the category A
products sourced, it is understood that 70 percent to 80 percent of the money
is about to be invested in those suppliers. Negotiation is a must. There are
chances when a supplier might make a nod to your offer, but do not back off.
You can still make offers like reducing the down payment, providing free
shipping, etc. Your goal should be a win-win for both yourself and the
supplier.
Please check back next week for a look at part 3 of this
series where we will discuss ‘Supply Chain Reconfiguration’.
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