Supply Chain Logistics & Inventory Control
A specialty chemical company with worldwide operations serving the electronics, surface finishing, and decorative industries engaged Daniel Penn Associates to improve its supply chain logistics and inventory control systems. At the time, the company had 14 manufacturing site, six R&D facilities, sales, and distribution centers worldwide and employs 1,300 people. In their efforts to reduce finished goods inventories and expenses while improving customer service, the company wanted to determine how they could reduce the number of warehouse facilities and service their customers based from fewer locations in North America. At the time, products were manufactured from four facilities and distributed through 22 distribution centers, of which 16 were public warehouses and six were company-owned. Initially, DPA visited with senior managers to define the study objectives in the areas of distribution management and inventory control. In a nutshell, our analysis was geared to answer three main questions: After thorough evaluations by our consulting team, interviews with all levels of management, analysis, and customer service reviews, we determined the study culminated in a detailed implementation plan outlining the steps for consolidation and optimization the distribution system. The corrective actions identified included: The direct bottom line results to the company included a 35% decrease in freight to public warehouse costs and 35% decrease in public warehouse costs. Inventory control is the implementation of management's inventory policies in a manner that assures that the goals of inventory management are met. Wise control of inventory is often a critical factor in the success of businesses in which inventories are significant. The goal of inventory control is to be sure that optimum levels of inventories are available, that there are minimal stockouts (i.e., running out of stock), and that inventory is maintained in a safe, secure place and is always readily accessible to the proper personnel. Policies relate to what levels of inventories are to be maintained and which vendors will be supplying the inventory. How and when inventories will be replenished, how inventory records are created, managed, and analyzed, and what aspects of inventory management will be outsourced are also important components of proper inventory management. In the Beginning
Prior to the eighteenth century, possessing inventory was considered a sign of wealth. Generally, the more inventory you had, the more prosperous you were. Inventory existed as stores of wheat, herds of cattle, and rooms full of pottery or other manufactured goods. This phenomenon occurred for good reason. There were a number of concerns for business-people then. Communication was difficult and unreliable, easily interrupted, and often took long periods of time to complete. Stocks were difficult to obtain, and supply was uncertain, erratic, and subject to a wide variety of pitfalls. Quality was inconsistent. More often than not, receiving credit for a purchase was not an option and a person had to pay for merchandise before taking possession of it. The financial markets were not as complex or as willing to meet the needs of business as they are today. In addition, the pace of life was a lot slower. Because change occurred gradually, it was relatively easy to forecast market needs, trends, and desires. Businesses were able to maintain large quantities of goods without fear of sudden shifts in the market, and these inventories served as buffers in the supply line. Customers had a sense of security, knowing that there was a ready supply of merchandise in storage, and that comfort often helped to minimize hoarding. In the eighteenth and early nineteenth centuries, markets were very specialized. There was often one supplier for each market in each area of business. Except for the basic...