New Paper Discusses Inventory Reduction Techniques

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Sourcing Strategies

I chatted with a prospect late last week who had asked whether or not we help companies save money not only through sourcing techniques but also with re-ordering and inventory optimization, essentially to help firms reduce the amount of inventory on hand. [We do.] But the question got us thinking – if a company undertakes a sourcing initiative, how should the notion of “annual volume” be communicated with potential suppliers given the current economic environment? How can sourcing initiatives help take inventory not only out of the four walls of one organization but out of the supply chain altogether?

In addition to managing inventory, financial executives focus on cash and cash management. And if you are an operations or sourcing professional and your company has deployed “lean” to its business, you might be asking the question, “how can I squeeze more cash out of my existing operation right now?” In a recent paper written by Jean Cunningham Consulting, entitled: “Financial Worries: Take Action With Lean Now,” the authors suggest several tactics to improve cash flow. Two of those methods apply directly to sourcing initiatives. The first method the paper suggests is to “buy only what you need,” and identify local suppliers who can ship smaller quantities more frequently. The paper also suggests sourcing professionals may want to deploy external kan-bans – buy based on actual consumption as opposed to forecasted demand.

We will cover additional strategies for deploying Lean Sourcing techniques to metals purchases. Many of the major steel service centers will deploy kan-bans, stocking and consignment programs for their customers. If you aren’t taking advantage of these types of programs, now is a good time to look into them. Re-sourcing for inventory optimization will be key during this downturn. MetalMiner readers can read the lean paper here.

–Lisa Reisman

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