Benefits and Methods of Zero Inventory Management

Introduction: Although inventory is a resource that must be allocated to maintain uninterrupted production and operation activities under the premise of not being able to predict future changes in demand, excessive inventory reduces the competitiveness and operational efficiency of an enterprise. If enterprises can realize zero inventory in their business activities, their core competitiveness will be greatly enhanced.

The benefits and methods of zero inventory management

I. Zero Inventory and Zero Inventory Management

Zero inventory refers to the minimization of inventory through the implementation of specific inventory control strategies. Processing and manufacturing enterprises, for example, its zero inventory refers to the material (including raw materials, semi-finished products and finished products, etc.) in the procurement, production, sales, distribution and so on one or several business processes are in a state of turnover, not in the form of warehouse storage, that is, theoretically speaking, the inventory of stock is the amount of daily production of the amount of the market needs, in the end of the daily production and operation of the inventory of stock is zero. The purpose of realizing zero inventory is to reduce the social labor occupation and improve the economic efficiency of logistics. Although zero inventory is a realm, is the enterprise management to pursue an ideal state, but the enterprise in the actual operation, through the continuous pursuit of zero inventory, so that their inventory compared with the past or compared with competitors can be infinitely close to zero, so as to enhance their core competitiveness.

Inventory can guarantee the continuity of production, but it does not increase the value of the product. Excessive inventory not only takes up a lot of money, but also masks a lot of management problems and increases the cost of goods and management costs.

The goal of zero inventory management is to meet the customer service requirements under the premise of controlling the level of enterprise inventory, improve the efficiency of the logistics system, minimize inventory, and achieve management optimization, so as to enhance the competitiveness of the enterprise, and to obtain the maximum benefit. Zero inventory management is an advanced modern management method that has attracted the attention of the business community, and requires comprehensive management techniques, involves all aspects of enterprise purchasing, production and sales, and penetrates into every activity of the enterprise, making it difficult to implement. Therefore, the implementation of zero inventory management requires enterprises in the procurement, production and sales process of continuous innovation, the establishment of a set of management and technology system suitable for the actual enterprise.

The value-added path of zero inventory management

Modern logistics is seen as the third source of profit, is the most promising link to reduce costs and improve efficiency, and zero inventory management is an effective way to optimize the allocation of logistics resources. Adopting zero inventory management will reduce circulation links, improve logistics efficiency, and create more value for the enterprise.

1. Reduce operating costs

Cost reduction is the core content of logistics management. The use of zero inventory management can effectively control inventory, accelerate the turnover of liquidity, reduce or even eliminate the huge liquidity occupied by the enterprise inventory, reduce the capital costs and risk burden brought to the enterprise. After the implementation of zero inventory management, due to the reduction in inventory size, the number of inventory tends to minimize the preparation of special warehouses for inventory and its ancillary equipment and management costs can be reduced, thus reducing the cost of storage; and due to the close cooperation between the enterprise and the supplier to strengthen the internal economies of scale, coupled with the simplification of the procurement process, so that the purchase price and handling costs can be reduced.

2. Improve product quality

Quality is the life of an enterprise, and focusing on quality management will bring more benefits to the enterprise. Zero inventory management strengthens quality management and reduces scrap, which not only improves the profitability of the product, but also enhances the competitiveness of the product in the market. First, zero inventory management is to demand production, requiring companies can not have excess inventory, all employees must be in their respective positions to take quality seriously as well as any behavior that may lead to a decline in quality, prompting employees to improve quality awareness.

Secondly, zero inventory requires that suppliers must be able to supply on time, according to quality, according to the amount of supply needed by the enterprise, requiring excellent and stable suppliers as a guarantee. Third, zero inventory management requires a high degree of consistency in all aspects of business operations, once the quality of the problem can be identified and resolved in a timely manner, to reduce the inventory to cover up some of the problems.

3. Improve the efficiency of capital utilization

The amount of liquidity required by the enterprise, under certain conditions depends mainly on the liquidity turnover rate. In a certain period of time, the more the number of liquidity turnover or turnover of the fewer the number of days, that liquidity turnover faster, the better the utilization of funds. Zero inventory management so that the inventory of occupied funds to a minimum, thereby invariably increasing the enterprise's working capital. Enterprises can save the funds for other investments, in order to obtain the corresponding return on investment. If you save money and invest in securities, you can get the corresponding interest income; or save money for the expansion of the enterprise itself, you can earn more profits for the enterprise to lay the foundation.

The value-added strategy of zero inventory management

Zero inventory is favored because it can save the cost of the enterprise. Enterprises can make decisions based on their own environment and management level, and constantly pursue inventory minimization.

1. To play the value-added function of the logistics industry in the regional economy

The advantage of industrial clusters in the regional economy is reflected in the low cost of scale, because the industrial clusters constitute a close industrial chain. Logistics industry clustering is the main component of the regional economy, to improve the efficiency of the production field, circulation area and economic efficiency, improve the competitiveness of the regional market, change the layout of the production enterprises and production methods play a positive dynamic role. The development of regional economy is accompanied by the increase of regional material flow, and the more perfect the regional logistics network system is, the more value-added it is to the regional economy. The more perfect the regional logistics network system, the stronger the value-added function of the regional economy. The clustering effect of the logistics industry builds a platform for the value enhancement of the industrial chain, making the implementation of zero inventory management possible.

2. Realization of logistics integration

Logistics integration refers to the raw materials, semi-finished products and finished products production, supply, sales combined into an organic whole, to realize the production and circulation of 'integration. Modern logistics management will be suppliers and users into the scope of management, through logistics integration to achieve differential competitive advantage, so as to use the competitiveness of logistics to increase the flexibility and profitability of the enterprise and even the entire supply chain. Supply chain management takes the optimization of the supply chain as the core, emphasizes the coordination between core enterprises and related enterprises, and embodies the operational integration through information***sharing, technical support, resource allocation optimization and value chain incentives.

Supply chain management expands the original logistics system to form a network organization that goes beyond logistics itself, enabling enterprises to respond faster, with more systematic service functions and more modern means. In a supply chain, the scope of enterprise services can be extended upward to market research, procurement and order processing, and downward to distribution, inventory control, loan recovery and settlement. In the integrated logistics management system, the relevant enterprises to strengthen cooperation, the supply chain logistics, capital flow, value flow, information flow and other effective control, for the realization of the goal of zero inventory management to create the conditions.

3. Realize on-demand supply

Zero inventory requires completely on-demand production, on-demand procurement, that is to say, raw material procurement, product production, finished product sales must be timely. To this end, one is to ensure that the information in the sales chain must be timely and accurate, the enterprise can produce according to the order, to maintain and the market need to be in tune. Secondly, there must be a highly flexible system that can adjust production lines and production processes according to order requirements for rapid conversion to ensure that the market's individualized order requirements are met in a timely and accurate manner. Third, to maintain close cooperation between upstream and downstream enterprises in the supply chain, to achieve information *** enjoyment, to ensure that upstream and downstream enterprises on procurement, production and sales of a consistent understanding, to eliminate the supply chain inventory downward and upward section by section to become larger bullwhip effect.

4. Transformation of the concept of staff

Enterprises in the implementation of zero inventory management before the mobilization of all employees, for different positions in the staff targeted publicity to achieve the implementation of the significance of zero inventory management for everyone to understand, and at the same time a strict system of rewards and penalties, to enhance the production of business operations, the production of interdependent processes, to form a good atmosphere, to ensure that zero inventory management. Form a favorable atmosphere to ensure the smooth progress of zero inventory management activities. The company's sales department is committed to expanding the sales market, and to ensure that the sales channels and the stability of the order quantity, and the production department should have the flexibility to adapt to the flexible production mode to fully cooperate with the sales department's work, so that the enterprise can be more balanced production, the purchasing department with the production and sales departments to purchase the required goods in the right amount at the right time.

5. Strengthen supplier management

Supplier management includes the selection of suppliers and supplier dynamic management. Reasonable selection of suppliers, and suppliers to establish a long-term partnership, *** with the collaboration to solve the inventory problem, to ensure the timely supply of orders, is a basic work of zero inventory management.

As zero inventory requires suppliers to provide the right goods in a timely manner at the time of need, therefore, the supply capacity, technical strength, quality control capabilities, commodity prices, supply distance, after-sales service, industry experience, etc. are the main factors to consider in selecting suppliers. Through the establishment of supplier's comprehensive information file, to strengthen the supplier's dynamic management, to form a customer, supplier information in one of the *** enjoy the data statistical analysis platform, regular evaluation of suppliers, the information timely feedback to the supplier, and tracking the supplier's improvement, the unqualified suppliers to eliminate.

6. Implementation of reasonable distribution

Logistics distribution to a certain extent affects the amount of enterprise inventory. Under the zero inventory requirements, only when needed to purchase the required quantity of goods, must have a very efficient distribution system. Generally speaking, in the absence of buffer stocks, production and sales operations are more sensitive to delivery time. Through the establishment of a sound logistics system, the implementation of reasonable distribution, such as direct delivery of goods to the workshop and production line, timely delivery of goods produced in accordance with the order to the user to achieve zero inventory.