Inventory is a crucial component of working capital management, that said, managing inventories is often one of the least glamourous roles in the business; any stock-outs and everyone knows about it, any excess or obsolete stock and something of a ‘blame game’ may ensue.
Inventory, time, and capacity buffers are always present in some form. Recognising them in the current operating system is the starting point to transform outcomes. Mapping out these buffers allows direct correlation with financial results; cash flow, profit, return on investment. Designing and managing the portfolio of buffers allows businesses to predict outcomes; it offers the opportunity to proactively direct operations and not simply lurch from one intervention to another. Intelligently designed buffers break this cycle as part of a Flow-First approach.
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What we do
Together with our OP2MA capability framework, we review planning and management processes, organisational design, and systems configuration, including:
Item stratification and how this aligns with business priorities
Economic order quantities and the balance between the purchasing process and minimising total costs
Inventory planning parameters and the key drivers of demand and supply variability
Performance management; inventory availability, excess and obsolete stock, and the controls on inventory levels.
Flow-First design recognises the variability inherent to supply chain networks and configures the operating model to the specific context of a business. Placement of inventory, capacity, and time buffers to mitigate and manage variability must then be supported by a flow-oriented planning approach; that approach is demand-driven planning (DDP). Key characteristics include:
Actual demand triggering execution activities
Buffers absorbing variability in the operational horizon
Cyclic production patterns enabling stable production and regular operating cadence
Forecasts supporting tactical configuration of execution parameters and planning of resources
The Result
Optimising inventory is a continual process; embracing efficient inventory planning and analysis will allow the business the potential to benefit from:
Increased sales and enhanced customer satisfaction
Improved cash flow
Reduced working capital
Reduced warehouse footprint and associated storage costs
"OP2MA played a crucial role in responding to the immediate challenges brought on by the Covid pandemic and the subsequent reshaping of our operations and depot network in order to deliver material cost savings for the long-term."