Warehouse and Inv Management

INTRODUCTION

Eagle a maker of specialty equipment whose sales are declining while cost are continuing to rise.if this situation continues company have to shut down..After a meeting president lays to do all necessary things to increase profit by 5% and 20% increase in sales and cut in labour , material and overhead. He assign this task to mr manoharan VP Finance &Accounts

SO WHAT ACTIONS SHOULD MANOHARAN TAKE TO REDUCE INVENTORY COST TO REDUCE INVENTORY BY 10 %

1. Reduce lead time

 This will allow a downward adjustment of safety stocks, and an improvement in availability. If supplier lead times can be reduced to below the required lead time to the customer, this will remove the requirement to hold stock altogether. Having lead time should reduce safety stocks by about 30% for the same availability.

Improve reliability of supply

Unreliable supply is one of the reasons for holding safety stocks: if delivery is guaranteed on the due date then safety stock can be reduced to that needed to cover common-cause variability of demand.

Order more frequently

Order little and often: this reduces the cycle stock. Ordering twice as often will halve the cycle stock. There is a cost: each order comes with an administration overhead and a labour cost to receive the goods. The former can be mitigated with automation and management by exception.

What dangers, if any, are there in reducing inventories?

Risk: Production Stoppage

The main drawback to a JIT system is the risk of production stoppage. If materials needed for production do not arrive in a timely manner, production may be delayed or halted until supplies arrive. This delay can reduce productivity and result in lost sales. Production stoppage can result in higher costs, customer satisfaction problems and profit reductions.