Inventories are expensive. There are the carrying costs which typically represent 1% to 3% of revenue. There are also the high costs of obsolescence that result from rapidly changing technologies or frequent changes in style preferences.

It would be ideal if inventories where not needed, but the reality is that some inventory is necessary. The trick is to minimize inventories while not shutting down plants for lack of parts or loosing an order for lack of product.

  
Two of the keys to reducing inventories are to improve reliability and reduce variability in today's supply chains.  One of    inventory's primary functions is to buffer the enterprise from these uncertainties. Uncertainties come in many forms:

	Did my supplier ship on time?
	Has my supplier sent the right product in the correct quantities with no substitutions?
	How long will it take for my order to arrive?
	Will my shipment arrive at the customer on time?
	Has the order been lost, damaged or diverted in transit?

In addition to uncertainty, inventories are used to put product closer to customers to offset long transit or long production lead times.

Solutions

If you have excess inventories in your operation, investigate these solutions from PERCITE:
  

SCMaster™