For materials management and logistics, this is a daily balancing act: Sales calls for a higher delivery service level to secure market share. Controlling ensures that the stocks do not increase further, because they tie up valuable cash reserves.
It does not matter whether it is raw materials or fuels, semi-finished products for production or merchandise, spare parts for maintenance, or service replacement parts for the after-market.
However, inventory reduction does not work when spread too thinly: every item and thus every product may only be reduced to the extent that no stockouts occur. The consequences of this would be disgruntled customers, productivity losses due to a lack of parts, additional controlling effort and displaced or lost sales.
Smart resource optimisation: Delivery service level as a target
Inventory optimisation therefore means systematically adjusting stock levels to a requested delivery service level, i.e. deliberately increasing some quantities, but lowering most to a specified level. This is done in dependency of production, distribution, product range and market.
Many agiplan projects have shown that in this way additional liquidity of 10 to 35 percent can be developed within just a few weeks. Despite lower stocks, deliverability can be improved.
Other benefits: Logistics costs, especially storage and procurement costs, are reduced significantly. Open spaces can be used for other purposes. Decreases the risk of scrapping. Material availability is increased significantly.
To conclude: Any production should implement an inventory optimisation process.
Inventory reduction is the biggest success factor for additional liquidity. This is a pressing concern on the part of the management - not only in times of crisis.