Inventory Optimization
One of the major operational challenges every organization face is to optimize working capital requirement without jeopardizing growth.
We will discuss on one critical component of Working Capital in this article which is Inventory optimization.
In one of the organizations, I worked with we had a challenge towards optimizing Inventory days viz-a-viz achieving cent per cent fulfillment.
The fulfillment norms set by various clients were different ranging from fulfillment within a few Hours to 1 day or so.
There were different criteria to look into.
No of SKUs for each client were different.
Another criterion was fluctuations in sales orders due to various factors (most of them totally beyond control of the organization)
We broke the problem into many subparts and brainstormed various solutions for each subpart.
For e.g.
- There were more than 100 vendor partners who were delivering finished goods to the warehouses. Vendor partners also had MOQs constraints and they were delivering from various parts of country.
We needed to look at each vendor partner separately and tied our purchase orders to the day when vendor’s depot was being serviced from its manufacturing location.
We mapped sourcing point of vendor partners so as to clearly understand total lead time in the system for delivery up to warehouse.
Also Purchase orders were linked to case size of the SKU to get frequent shipments eliminating damages in transit.
- Quality norms at our warehouses were streamlined and communicated to the vendor partners.
- Forecasting system was fine tuned to reduce buildup of higher inventory to compensate as safety stock in case of any fulfillment issue from vendor partner.
- We worked with various national/local courier partners to tighten up delivery and reverse logistics process.
To solve every problem, it is critical to divide the problem into small subparts so as to attack each subpart and be successful.
