Question

What is a zero-based channel? What role does inventory management play in achieving a zero-based channel? What methods are available for reducing inventory?

Answer 1

A zero based channel is designed to meet the target market demand at minimal cost of performing the task via the same channel so that customers receive the material or service within the desired timeline.

The bottom line of zero based channel is minimal cost of performance for channel flow. Inventory management helps it achieve it by control the input and output of material. This necessary follows the rule of JIT (Just in time) which can be achieved through proper communication, lesser losses, accurate forecasting. When the inventory base is low, the holding cost, material management cost and even overhead is low. These all add up to minimal flow cost, thus aiding zero based channel.

Inventory reduction can be achieved by the following methods:

1. Reduce demand variability through data analysis
2. Improve forecast accuracy through data collected from better sources
3. Keep reinventing service levels
4. Continual improvement and removal of Muda
5. Proper communication and transparency
6. Focus on delivering based on Economic Order Quantity and Economic Production Quantity.
7. Reduce supplier and manufacturer lead times