On the other side, your controller sees manufacturing inventory as a liability, or more accurately, a disadvantage since it ties up working capital that could be needed in the short-term. And, depending on the type of manufacturing you do, your financial people could fear you’ll be stuck with excess inventory if the nature of your business turns in a different direction.
But no matter which side of the equation they happen to fall on, everyone can agree that inventory is costly, and it makes good business sense to employ certain strategies to reduce it and help your company remain competitive and profitable.
Here are ten suggestions to consider. Not all of them will apply to your business, but even if you employ a few of them, they can help you reduce your operating costs substantially:
#1 Decrease supply chain lead times
Any reductions in total supply chain lead-time can result in materials being held in stock for shorter times. By using a domestic supplier, for instance, you could reduce your lead times by up to two weeks. Ordering smaller quantities more frequently, as opposed to ordering in bulk, has been shown to decrease lead times along the supply chain.
One method to help you understand supply chain time is to perform what is called “supply chain mapping.” A supply chain map, usually produced at a higher level in your organization, is a graphical representation of your supplier network. It provides transparency, which helps you determine how your lead times can be reduced.
#2 Reduce production lead times
Cycle times are the amount of time it takes to complete various phases of the manufacturing process. The faster these processes are done, the shorter the cycle time. Quicker production results in lower manufacturing inventory levels because the stock of raw materials is reduced and work-in-process is moved to finished goods, which are shipped out of the plant rapidly.
#3 Automate the ordering process
Many manufacturing businesses are reducing inventory and minimizing the costs of purchasing by automating their ordering process with the help of Manufacturing Resource Planning (MRP) systems. By eliminating paper purchase orders, and their associated costs, businesses save money. And with an MRP system to signal shrinking stock levels, the “safety net” of excess manufacturing inventory is no longer necessary.
When you implement a dynamic system that recognizes when stock needs replenishing and identifies changes in trends, you greatly reduce the chances of both excess and obsolete inventory.
#4 Improve relations with your suppliers
A close relationship with each of your suppliers enhances the entire supply chain and assists with inventory reduction. Having a strong connection with them is an indication that communication is effective. Suppliers know their products best, and with a solid relationship, they will share their knowledge. This kind of communication can result in faster deliveries, fewer returns, and lower inventory.
Read more here http://manufacturing-software-blog.mrpeasy.com/2018/05/15/manufacturing-inventory/