Meanwhile the commercial director is forecasting an increase in sales and harping on about customer service levels.
Yes, you know that’s important (obviously) but none of them really understand how complex this all is.
A 10% reduction in inventory sounds simple – but don’t they realise you’ve got 10,000 items to manage?
All of them have different reasons for having a certain amount of inventory, so which ones do you reduce?
The new ERP system was supposed to help. But it doesn’t seem to be doing what it’s meant to. What’s wrong with it? Can it be fixed?
An operations manager of a manufacturing SME was being told to push the overall inventory down but at the same time was being asked to increase inventory holding in certain areas.
On our advice, the Board agreed to a comprehensive inventory analysis which Geoff Relph carried out with the operations manager.
They sectioned the inventory into different groupings showing that some was held for strategic reasons, some operational, some was old, and so on.
This showed that they could manage the different areas of inventory in different ways and it allowed the operations manager to go back to the Board with options for what could be done – and explain that there were strategic decisions behind some of the inventory holding that they had to take responsibility for because they all owned the inventory, not just operations.
Our analysis also found a number of other problems, including that they weren’t dealing with their engineering change notifications very well.
There was a huge backlog of ECNs and this meant that if a product on the shop floor now needed 10 rivets less than it needed previously, the automatic inventory ordering was still using the old build and materials plans. So inventory was continually being ordered that wasn’t needed because the design or build process had changed and the two parts of the process were now working against each other.
We helped them identify and resolve areas that were not being managed properly so they could stop pushing unwanted inventory into the business.
As well as helping the operations manager with her original problem, we also acted as facilitators, helping different departments understand each other and the full consequences of their out-of-date processes.
Read more case studies in ‘Inventory Management: Advanced Methods’ (Kogan Page, July 2015) written by Geoff & Catherine. Exclusive discount available through this site.