For a turnaround strategy, it is important to consider the inventory management strategy. The feedback mechanism system would help us to create a value after we focus our work on the following strategies:
· Maintain effective inventory level as a function of product or service and based on the demand side of the customer’s pull through proper forecasting of the demand allowing smaller lead times and minimal safety stock.
· Order efficiently from the manufacturer by consolidating or disintegrating demand after taking into account the order processing cost and the cost of maintaining the inventory.
· Base Safety Stock on Customer Service by using the appropriate number of product classes, setting the dividing lines between each class in the best manner, updating safety stock levels dynamically, and basing the service levels of each class on the financial goals of the business.
· Base Cycle Stock on Economics by getting a handle on the acquisition transaction costs that will reduce average inventory or allow for reducing changeover and receiving labor.
· Lower Inventory Holding Costs by improving space utilization by narrow aisle handling equipment, mezzanines, layout, or more appropriate storage models.
Given the constraint of time and money, this would help us in actually releasing a greater amount of working capital.
For assortment management, the following strategies can implement:
· Use of routine demand forecasting by using manually edited arithmetic forecasting models to reduce the forecast errors to reduce overstocking, backorders, and DC return from the stores, holding inventory levels closer to customer service level.
· Rationalize SKUs by developing an activity-based costs for each SKU and separate them on the basis of their profit margin and also by quantifying the sales volume correlations between SKUs, based on the analysis of both individual orders and aggregate order patterns by the customer.
· Implement SKU specific purchase transaction costs by purchasing transaction costs that are not normally SKU-specific.
· Apply Postponement in the sense that for parent products from which multiple SKUs can be manufactured, only partially completed manufacturing, placing semi-finished product in inventory, and then completing manufacturing of the final SKUs to order reduces inventory.
· Implement Common Supplier Joint procurement for Purchased Products as this would effectively reduce unit purchase transaction costs and thereby reduce both cycle stock inventory and annual purchase transaction expenses.
Distributed Network Organization
For a turnaround strategy for the distribution network reorganization, consolidation or even opening of a new warehouse is under the consideration. The factors to take into account for the consolidation or opening of the warehouse is demand based on the geographical locations, historical data on the consumption based on geography, growing trends on demand data, cost benefit analysis of opening a warehouse vis-à-vis the maintenance of the warehouse and projected demand, consolidation of a warehouse based on transportation costs and demand.
** A Part of the article is referenced from a web-site.