We all know the line: “The Inventory needs to be reduced significantly, with x %”. Inventory ties up cash and prevents us from making a good return on investment.

This target needs to be placed as high as possible in the organization, and should be a deliverable for the whole management team, to avoid sub-optimization and departmental or even personal preferences in balancing options and trade offs of different stakeholders.
The key is in reducing uncertainty in demand and supply and reducing the lead time. Within the whole supply chain options are plentiful. Prerequisites are detailed knowledge of the chain, sound planning and processes and excellent communication.

Examples:

Littelfuse

We had 3 regions, The America’s, Europe and Asia. Each with a central DC carrying the all products. We changed the whole distribution model, so that the product was carried in inventory at the source region only. The product was distributed upon demand directly to the customer. A German customer would receive the delivery, with EU paperwork from Asia. So even though we had some more transportation costs (less bulk shipments), we realized a significant inventory reduction, and less obsolescence.

Crocs

We implemented KanBan planning on the Top 10 products which were manufactured in Italy. Detailed planning with the Italian team to identify the KanBan volume, their manufacturing cycle, and the raw material lead-time planning led to a strongly reduced inventory in the whole chain.

Implementing direct deliveries strongly reduced the length of keeping inventory and thus reduced the inventory (and distribution costs, see Cross Docking)

Fine tuning the shoe size range per category. There is no such thing as just Ladies Shoes. For each category the audience is different, translating in different demand. Working together with product development, marketing and planning and looking at the grouping of products, lasts and silhouette and their subsequent size demands led to more reliable curves and reductions in inventory and seasonal leftovers. A great example of nitty gritty fine tuning.

Another example was the safety stock plan. We found a delay in the calculation to reduce the safety stock after the season, where we still carried safety while the goods were on sale.

Bigger impact projects are described on the other pages with S&OP and Cross Docking.