Inventory reduction measurements that can help supply chain managers.
Measure improved inventory accuracy, labor hours saved taking inventory, elimination of racks, shelves, and materials handling equipment, and reduced maintenance costs. Don't stop here. Many suppliers readily agree to hold materials on a consignment basis. This is a valuable cost-avoidance and cash-flow improvement. Whenever possible, drive to get agreement to pay on consumption. Also, track reductions in supplier inventory. This will help them reduce or hold down their costs to you. Measure inventory committed to by suppliers and value of materials that are now on consignment or on pay-on-consumption systems. Make note of the various functions or departments that are outsourced. Obtain realistic estimates of the amount of inventory and overhead that would have been required to support these activities if they were not outsourced.
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