There are many reasons to avoid excess inventory. It ties up corporate cash flow, takes up valuable warehouse space and consumes needless amounts of employee time with inventory movement and cycle counting. Reducing excess inventory once it exists expends more corporate time and resources. With this in mind, ChemRite’s team has taken steps to avoid the accumulation of excess inventory in its warehouse facilities.
How is this accomplished? Our experienced team has a thorough understanding of the factors which cause inventory excess. For example, it is vital that order quantities and due dates are adjusted when production requirements change. ChemRite’s Production Specialist sends out electronic notification to all key team members, informing them of any revisions to the production schedule. Because of the changing needs of our customers, these updates may occur daily. he purchasing department works diligently to adjust material quantities and arrival dates to ensure that only the material which is needed to meet current production arrives at ChemRite’s facilities. Purchasing plans for material to arrive within 2 to 5 days prior to production date start, allowing a 2 day “dock to stock” window for quality assurance inspection.
Another factor which may lead to inventory excess is accepting orders early from suppliers. ChemRite’s Warehouse Manager has established a corporate receiving policy in which only truck loads which have a pre-scheduled dock appointment will be accepted at ChemRite’s facilities. When suppliers call in to schedule a dock appointment, the Warehouse Manager confirms the material being delivered to make sure that it will be used during the next week’s production. If the material is not scheduled for production use, receiving will be postponed until it is deemed necessary for upcoming production.
Planning factors such as safety stock, lead times, lot sizes and minimum order quantities are also taken into consideration. ChemRite’s purchasing department carefully monitors materials which have long lead times and compare them against customer forecasts to determine when it may be best to maintain safety stock. Purchasing regularly reviews material purchase history, maintains current supplier price lists and evaluates competitive pricing. hese efforts allow them to make an accurate comparison of planning factors against current demand, which greatly assists in reducing inventory excess.
It may not be possible to completely eliminate inventory excess, but a thorough understanding of the factors which cause excess and a solid plan of attack to prevent it goes a long way toward avoiding this common business dilemma.
ChemRite’s Inventory Policies
- No deliveries accepted without a pre-approved dock appointment
- Suppliers to provide a valid CRCP purchase order number and a proposed shipping manifest when scheduling dock appointment
- Material order quantities and due dates adjusted when production requirements change
- Plan for materials to arrive no sooner then 2 to 5 days prior to production
- Allow a 2 day “dock to stock” window for quality assurance inspection
- Materials with long lead times may only be safety stocked if based on a reliable customer production forecast
- Purchasing to work with quality supplier network to maintain current price lists and evaluate competitive pricing