Question

Healthcare Financing:

How can an organization reduce the value of inventory and the number of items in inventory?

Answer 1

An organization can reduce the value of inventory and the numbers of items in inventory by the adopting and strictly adhering the following measure:

1. By sending the correct signals to those functions that control inventory so that they are properly motivated towards reduction.

2. By addressing and identifying the cause of the problem, not the result so that inventory buffers are not needed, then reduce the inventory accordingly.

3. By re-engineering the order - to -delivery cycle to find a way to do it faster, better, cheaper. Dramatic rethinking of business processes often results in significant reductions in lead times and increases in control that eliminate the need for inventory buffers which pays benefits in increased quality and improved customer service.

4. By streamlining the entire supply chain management can reduce inventory, improve time to market, compress cycle times, free up more cash, decrease cost and improve profitability. For example, an organisation can find out when the customer will run out of the item they supply and automatically restock it. This streamlining process will enable to reduce inventory buffers, decrease cycle time and can achieve significant cost reduction.

5. By reducing cycle times means reduced cost, reduced inventory levels, increased customer service, and better quality. To reduce cycle time organizations need to streamline every aspect of their operations especially the order -to- delivery process.

6. By building flexibility into their organization operation so as to operate in order to quickly respond to changing customer demand. Today's customers are demanding short lead times, on-time delivery, quality products, and good customer service. The consequence of non- compliance with these customer demands will be lost business and something that can not allow happening.

7. By eliminating obsolete inventory - Organisation should monitor the product life cycles of every unique item each month to track demand changes over time. By tracking demand patterns help a business more accurately forecast demand and reorder points bases on actual future sale potential. Obsolete items can compound holding cost and can even take up storage space could be used for more popular items. So better to return or sell out at reduced price which may have negative impacts on short term profits but it will have a long term positive effect as carrying costs can be eliminated from the equation.

8. By increasing communication with suppliers can help to negotiate reduced "Minimum order Quantities"(MOQs), so that smaller, more frequent orders can be placed offsetting long term risks of holding too much inventory. Smaller, more frequent orders enable an organization to increase ordering flexibly when demand patterns shift.

9. Inventory planners can utilize a number of different techniques such as ABC analysis, cycle counting, product life cycle management, etc. to better manage inventory levels across complex supply chains.