Incorrect Inventory Mix Costly According to Technology Group International
Toledo, OH -- (ReleaseWire) -- 02/06/2007 --Distributors of items with long lead times of 30 days or more, face a limited number of options to remedy a mix issue. The best course of action is to alter buying habits. This is a multi-step process which includes three tasks. First, create a continuous flow of product from a supplier in which you “re-order” frequently (weekly). This represents the replenishment cycle time for the item, which is less than the product lead time. Second, reduce inventory levels to be reflective of more frequent ordering. And third, reduce exposure to excess inventory potential.
Rebecca Gill, vice-president of Technology Group International, contributed a feature in the current issue of Progressive Distributor. Gill reveals, “Incorrect Inventory Mix or stocking the wrong inventory occurs most commonly when a distributor sells products with multiple options or products which are similar in nature. The cause of such stocking issues is generally a result of one of the following factors. Changes in historical product mix demand, maintenance of all combinations of options in inventory, and lack of local ability to alter options on products are all underlying causes for stocking the wrong products.”
Distributors of items with short lead times of 30 days or less, are similarly limited in the number of options to remedy a mix issue. The best option in this scenario is to increase ordering frequency and reduce the volume associated with each purchase. This allows a reduction in inventory levels to be reflective of more frequent ordering (an effectively reduced lead time).
A relatively quick correction for excessive inventory is to review existing vendor lead times and order frequencies per product SKU. For top-moving products, review the vendor lead time, the order frequency with which you purchase the item, and the average volume of each purchase. If issuing purchase orders less frequently than one quarter of the lead time, then distributors are maintaining excess inventory of the item and thus increasing the likelihood that one will have an incorrect inventory mix if demand patterns shift.
About Technology Group International, Ltd.
Founded in 1990 and headquartered in Toledo, Ohio, Technology Group International is a proven technology leader delivering Tier 1 application software functionality at a price performance level that can be readily accepted by organizations of all sizes. Specializing in software systems for small and mid-market manufacturing and distribution companies, TGI’s integrated Enterprise Series software suite is a complete business process management solution. The product offering includes Enterprise Resources Planning (ERP), Manufacturing Resource Planning (MRP), Supply Chain Management (SCM), Warehouse Management System (WMS), Advanced Planning and Scheduling (APS), Decision Support System (DSS), Business Intelligence, Manufacturing Execution System (MES), and eCommerce. TGI implements, maintains, enhances, and supports its packaged distribution and manufacturing software solutions directly and via its channel partners.