Basically, the optimization of inventories consists of a 4-step approach consisting of an as-is analysis, a weak point analysis, a target concept and the realization of short-term as well as medium- to long-term effective measures. This concept is suitable for both manufacturing companies and retailers.
Inventory optimization: Determining the right warehouse size
Safety buffers that are too large, lower customer demand than expected, changes in a company’s own product portfolio that lead to unusable remaining stocks: Inventories tend to grow out of control if companies don’t actively counteract them. Here’s how to define – and maintain – optimal inventory levels.
As much as needed, as little as possible
Creating the perfect balance between supply capability and working capital retention
Defining the right warehouse size has always been a challenge. However, increased uncertainties in supply chains have made the task even more complex.
Simply inflating the warehouse is a relatively simple measure, but it is also expensive because it ties up a lot of working capital. With our four-stage concept, we support you in setting up the inventory as lean as possible and still remain able to deliver at any time.
In 4 steps to the optimal inventory
Status quo recording
Do you know which items are currently in your warehouse?
As a rule, we work with data analytics to dynamically map inventory levels and their development. This is because our experience shows that despite digital recording, there is often no overall view of the inventory. Especially when the inventory shows weekly increases, it is often not clear what is actually behind it.
Weakness analysis
Based on the insights gained, we work with you to identify optimization potential, for example:
- Can sales, production and procurement processes be more closely interlinked?
- Do the current safety stocks and/or batch sizes exactly match the needs of your customers?
- Are there defined responsibilities for the material groups?
- What optimization potential exists in the current procurement processes and associated replenishment times?
Conceptual design
Together with you, we define the target level of optimal inventory and develop a strategy on how to accomplish its achievement. For the future, we develop a steering model that enables your team to control the inventory levels according to the defined optimum.
Realization
In terms of implementation, we distinguish between short-term and medium- to long-term measures.
The short-term measures are aimed at quickly reducing inventories in order to achieve the optimum warehouse size as quickly as possible and release the tied-up capital. These activities include:
- Sale of surplus material
- Elimination of old, unusable inventory
- Better allocation of goods when multiple locations are available
Medium- and long-term measures are used for long-term inventory control – so that your warehouse never again reaches uncontrollable proportions.
- Optimization of data quality / creation of dashboards
- Adjustment of safety stock levels
- Definition of clear responsibilities in procurement and planning
- Definition of clear processes and thresholds for orders
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