For medium sized manufacturers stock levels provide approx. 10% of the circulating asset. The so tied up capital is equal to more than 5% of the annual turnover. High stock levels and high processing time tie up capital, increase process costs and reduce flexibility.
For the following scenarios this tool would be useful:
- stock levels aren’t transparent
- components are often stored or transferred
- inadequate use of systems for planning and disposition
- up- and downstream processes aren’t integrated in planning and disposition of components
- stock levels aren’t coordinated between production and distribution
- no inventory management across the entire supply chain in place
If you use this tool in the right way you can achieve:
- reducing stock levels wile simultaneously secure material availability
- reassurance of product planning
- determination of responsibility for stock levels and monitoring of stock level growth
- steering of stocks via minimum / maximum quantity
- leading to kanban driven production – ABC / XYZ analysis
Step by step guide:
- business process modelling and analysis of planning and steering processes
- analysing of stock levels and processing times
- identifying of potential
- development of actions to reduce stock levels – e.g. revision of disposition process
- setup of consignment stock
- implementation of disposition process and system as well as integration of warehouse planning and steering
- realisation of fast practical measures
Our experience:
In many companies we experienced the following reasons for increased stock levels.
- insufficient sales related planning
- instable planning
- processing times in production too long
- replacement time too long
- production capacity too low
- machinery and processes are failure-prone
- unfavourable production quantity
Results which clients achieved:
- reducing of stock levels up to 30%
- realisation of first reduction during project implementation phase