Reducing Inventory by Following Suppliers’ Discipline

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Because of anemic economic recovery, the reduction of inventory is crucial for manufacturers. In order to better manage inventory levels while still ensuring the right part is in the right place at the right time, manufacturers are increasingly relying on advanced information management solutions, according to a survey released in December 2015 by PwC US in collaboration with Manufacturers Alliance for Productivity and Innovation (MAPI). PwC and MAPI surveyed senior executives from 75 global manufacturers (with U.S. headquarters).

“Inventory is often considered by manufacturers to be the most valuable category of assets on their books; however, it can tie up large amounts of cash and diminish in value for a host of reasons,” said Stephen Pillsbury, principal in PwC’s U.S. industrial products practice. “As a result, it has become common practice for manufacturers to minimize inventory as much as possible without hurting customer service levels. While they continue to focus on managing inventory, they seem to have reached a point of diminishing returns and are now turning to advanced information management solutions to further reduce their inventory.”

When it comes to enabling agility, responsiveness and operating flexibility, 37 percent of respondents reported that their core ERP system was either not very effective or ineffective. Conversely, the other respondents with effective ERP systems were quite bullish on the usefulness of their supply chain visibility (SCV) systems when it comes to replacing inventory and costs with actionable and timely data.

Improving Supply Chain Management 

As effective systems drive better margin growth and higher turns, companies are still experiencing inventory growth and supply chain issues. When asked about the factors having the biggest impact on supply chain visibility, uncertainty of supplier deliveries was among the responses most cited.

/Respondents also addressed their ability to maintain optimal inventory levels, listing lack of discipline in operating processes and practices, a high degree of product complexity or number of stock keeping units (SKUs), and poor forecasts from marketing/sales as having significant impact/.

MRPeasy keeps statistics on vendors’ discipline and can help managers to choose the right vendor, according to historical data of average delays.

PwC and MAPI report.