Warehousing plays key role in inventory management

Manufacturing News, Source : TheManufacturer.com
Published : 14 Jun 2002 9:03

A study recently conducted by the Logistics Institute at Georgia Tech revealed that warehouse and logistics management plays a key role in inventory levels.

Dr. Ed Frazelle, director of the institute¡¦s Logistics Management Series, facilitated the inventory management focus group, which included representatives from 14 industry-leading companies.

¡§Increasing inventory turns and fill rate at the same time is a process not unlike using a divining rod to find underground deposits of gold. The barriers to increased turns and fill rate are often ¡¥underground¡¦ in decisions made in warehousing, transportation, and procurement by individuals not accountable for turn/fill rate performance,¡¨ said Frazelle.

The top factors influencing inventory turns in the warehouse were:

„h Inventory accuracy. Lack of trust breeds just-in-case inventory.

„h Number of SKUs. More SKUs means more safety stock and less attention to problem SKUs

„h Number of warehouse locations. The amount of inventory in a logistics network is proportional to the square root of the number of stocking locations. Fewer warehouse locations translates to less inventory, primarily safety stock.

The top transportation factors were:

„h Mode choice. Slower modes yield excess in-transit inventory. Less reliable modes yield higher safety stocks.

„h Delivery/pick-up frequency. More frequent shipments reduce cycle stock inventory.

„h Routing. Favorable routes and schedules reduce in-transit stocks.

The focus group included representatives from FedEx Supply Chain Services, NCR Corporation, Office Depot, The Gap, Inc., and Vistakon/Johnson & Johnson Vision Care.

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