Periodic inventory review
Inventory is reviewed at a fixed period say 3months or every month .This review helps in
management to know about order size and also high lights the slow moving and dead inventory .
Tight management of usage rates ,lead times and safety stock
This allows the firm to make sure inventory control is kept at the appropriate level .Such an
inventory control process helps to identify consumption pattern and eleminate high inventory.
Reduce safety stock
This can be accomplished by focusing on lead time of stock items .
Introduce or Enhance cycle counting practice
This replaces the conventional process of taking stock annually .Physical inventory is counted
several times in a year .
In this strategy , items are classified into three categories
Class A , Class B , Class C
Class A typically account for about 80% of annual sales and represent about 20% of inventory.As it
accounts for major part of the business a high frequency of review would have to be developed .
Class B account for nearly 15% of annual sales while Class C account for 5% of sales .
Shift more inventory or inventory ownership to suppliers and Quantitative approaches has to be in
system to ensure balance between inventory holding and ordering costs .
Next - cost of inventory
INVENTORY REDUCTION STRATEGIES