Wednesday, February 18, 2009


We don't give much of importance to inventory lying in our stores or warehouse . Its when some consultants points out that we have blocked moneys in these stocks that we realise that something has to be done to cut cost of inventory . following are certain steps which one should take to reduce cost on inventory.

1. Codify all items which are kept as stock in stores or warehouse .Use any inventory management software to track stocks and movement from one centre to another.
2. Classify items by ABC so you know what are high value items and keep a tab on their consumption and procurement . Next focus on low value items .
3. Examine value of items on basis of return on investment .
4.Identify high stock out items and then adjust buffer stock on cost trade off basis
5.Examine all items for safety stocks with respect of lead time , demand , stock out cost , carrying , ordering don't pile up stock intuitively
6. Do physical stock verification periodically and eliminate dead stocks ,accept obsolescence write off for these items .
7. Determine Economic Order Quantities of all items.
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