Inventory can be one of the major costs for many businesses and optimizing stock levels often becomes a primary objective. Business improvement initiatives such as lean or six sigma are often utilized in this task as their toolset is aligned with mitigating many of the causes such as:

• Variability in lead time
• Variability in demand
• Inaccurate forecasting
• Obsolesence
• Poor quality

Methodologies such as DMAIC are ideally suited to solving these problems as they encourage the business to be both analytical in their approach whilst looking for standardization.

Improvement programs in this are typically focus on internal processes and management and also the role of the supply chain.

The focus on internal activity is typically on improvements in forecasting (better understanding consumption rates and supplier lead time) this can facilitate more accurate stockholdings ensuring that they are more closely aligned with customer requirement.

Another common activity is to work with suppliers on root cause analysis on problems with lead time. All too often internal problems are then carried over into the supplier base causing lead time issues (for example providing inaccurate specifications or unrealistic delivery requirements).

Whilst improvement activity often interfaces with supply chain in a manufacturing environment (through the introduction of Kanbans for example), it also has a role to play where supply chain is the primary focus with many of the tools and methods being applicable.

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