Wednesday, August 6, 2008

Aggregate Inventory Management p-1

Inventory investment management continues to be a major issue for many organizations.Installing the latest software and mouthing the most popular buzzwords is no guarantee of good inventory management.
How to set up and maintain Aggregate Inventory Management for improved investment and operations management?
Aggregate Inventory Management is "establishing the overall levels of inventory desired and implementing controls to ensure that individual replenishment decisions achieve this goal."
It includes:
• How to assess overall investment levels and set targets.
• How to identify inventory investment level "drivers" and help control them
• How to link aggregate inventory management "macro" strategy to "micro" controls and develop accountability
• Performance measurements
• Specific techniques, such as ABC analysis, control parameters, inventory buildup charts, and input-output control.
• Goal—Helps manage assets and make money.
• Objective—Optimize inventory levels within the parameters of service, cost, logistics, process and investment objectives/constraints. Inventory management should be exercised to keep the lowest level of inventory consistent with achieving the objectives. Too much inventory reduces Return on Investment and Return on Assets (lower profits). It also tends to increase expenses, in the form of interest payments, handling and storage, management, damage, loss, obsolescence, tracking, taxes, insurance, etc.

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