Introduction and challenges
The reduction of inventory and physical work-in-progress remains a major economic performance challenge for companies in terms of maximising cash flow. In addition to its impact on working capital requirements and cash flow, inventory reduction also leads to a reduction in multiple costs: transport, inventory holding (warehousing, security, inventory) and even depreciation or destruction of obsolete inventory (product configuration exceeded, life expectancy remaining insufficient, etc.). There are several challenges companies face in achieving a sustainable reduction in inventory including increasing demands in terms of customer service, unreliability of forecasts, and difficulty in securing supplies.
To address inventory reduction in a sustainable way, companies need to make significant changes in terms of processes, governance, performance management and culture.
How we can help
With expertise in inventory reduction and business transformation, Argon & Co supports its clients in obtaining sustainable results:
- Diagnosis to quickly identify the stock reduction drivers of the current model (business processes and practices, performance management, IT systems, organisation and skills, etc.)
- Target inventory level via our “normative” approach allowing us to model the different components of the target stock (safety stock, campaign stock, anticipation stock, stock in progress)
- Definition of target business practices: review of processes impacting stock levels (stock management, forecasts), associated management rules such as safety stock dimensioning and target management system (indicators, rituals, etc.)