Don’t get bog down by these words.. Inventory management..

In my last blog I’ve explained you about what is inventory. We have also seen that inventory is nothing but the undesired cash blocked in a business cycle. So lesser the inventory better for business.

That means we must control inventory as best as possible. While doing inventory control please take care of following facts.

  1. Too much of Inventory control may cause loss of sales. This should be avoided.
  2. Too much of inventory will of course cause of blocking of cash flow and so may impact smooth operations of the organization.
  3. Too much of inventory also causes pilferage of material.

Various measures which can be easily initiated by any organization is as follows.

  1. Refinement of sales projection from market must be validated by multiple persons. We must avoid Bull whip effect as it will give rise to major inventory piling up.
  2. Production plan must be aligned with sales projections as best as possible.
  3. Operational setup capacity must be matched with demand as far as possible.
  4. All the weak points in supply chain needs to be attended on top priority, like non-performing vendors, single source supplier, Imports, high lead time vendors, financially weak vendors. Eliminating issues in supply chain and making it robust is must.
  5. Production Planning is a very important activity when you are trying to reduce inventory. Planning must be done by single manager or a single team. They should be aware of all constraints related to material sourcing so that they plan accordingly.
  6. Planning must always release PR only through MRP.
  7. Refined BOM and verified physically Vs System stock of inventory helps in reducing mistakes in procurement.


Inventory reduction can be focused in two ways

  1. Reducing non-moving inventory : this can be done in following ways
  2. Convert these non-moving items into usable models.
  3. Sell it back to supplier, wherever possible at discounted rates.
  4. Sell it to distributors at discounted rates as spares.
  5. Scrap it at lower value.
  6. Focussing on procurement and bring in limited inventory.
  7. Release Purchase budget on monthly basis to Purchase team and monitor it closely.
  8. Try to implement single piece flow in operations area which will reduce inventory in WIP.
  9. Implement Vendor Managed Inventory concept in your company.
  10. Try to find alternates for import items, this will help reduce procurement time, value and so inventory value also.
  11. Ask your R&D to work on commonization of input material across models wherever possible.





Ulhas Pujari