How to reduce inventory backlog, six reasons for high inventory and eight countermeasures

From the point of view of accounting and finance, inventory is an asset, and a safe inventory is needed in a certain period of time. However, high inventory and low inventory turnover take up a lot of money, which increases the storage cost, product selection time and a lot of labor costs. Regular or irregular inventory will also take up more time. The most serious thing is that high inventory will put great pressure on the cash flow of enterprises.

Although many enterprises have promoted the reduction of inventory or zero inventory to a strategic height, the inventory is always repeated, either lacking materials or high inventory; Either it can't be delivered, or the inventory is overstocked and scrapped. There are many reasons for excessive inventory. To sum up, the common reasons for excessive inventory are:

1. Only the direct purchase cost is considered.

If the annual demand for a spare part is 200 pieces, the supplier's quotation provides three schemes: Scheme A, the minimum order quantity is 200 pieces, and the unit price is 90 dollars; The minimum order quantity of Scheme B is 100, and the unit price is $95; The minimum order quantity of Scheme C is 50 pieces, and the unit price is 100 USD. The annual direct procurement cost of Scheme A is $65,438+08,000, Scheme B is $65,438+09,000 and Scheme C is $20,000. Many enterprises will choose Scheme A, regardless of the inventory management expenses and capital costs, or the risk of switching and upgrading parts, and take it for granted that the purchased inventory is an asset. Low-cost procurement may eventually lead to high operating costs.

2. Worried about potential sales losses.

The production plan comes from the sales forecast of the sales department, and the accuracy of the sales forecast is directly related to the cost of the whole supply chain. Sales are often not that products can't be sold, but that there is no product to sell if there is market demand. At the same time, the sales forecast may be too optimistic in most cases, and they prefer to have a rich variety and quantity of products to get more sales opportunities. At the beginning of this year, many construction machinery enterprises had high expectations for the country's new urbanization and were afraid of losing the opportunity to compete for the market. In the first quarter, they reserved a large number of complete machines and spare parts. As a result, the whole domestic industry was very pessimistic in the second quarter, and the inventory was quite spectacular. Major enterprises cut production or stop production.

3. The customer canceled the order

In the business environment where the existing credit system is imperfect, although the risk of default is decreasing year by year, it is not uncommon for customers to cancel orders, especially some verbal agreements, cooperation intentions or memorandums that have no legal effect. In addition, many uncontrollable factors lead to the cancellation of orders, which will cause the inventory backlog of the whole supply chain.

4. The demand and inventory management system is not perfect.

The demand planning of many enterprises is not based on objective demand, but a perceptual decision: raw materials are cheap, buy more; Spare parts delivery time is long, buy more; Transportation risk is high, buy more ... Rolling demand forecast does not support ordering cycle, and no active measures are taken to manage inventory. Inventory turnover rate and old inventory digestion consciousness are not high, products with short warranty period are not FIFO, and even products and parts are not classified by ABC.

5. Poor supplier performance

The supplier's delivery cycle is long, and the purchaser should prepare enough safety stock to make up for the supplier's delivery problem to cope with the risk of material shortage; The MOQ provided by the supplier is too high, especially the exclusive strong supplier, and the purchaser should order according to the MOQ quantity; The supplier's quality and delivery are unstable, and the purchaser has to increase the inventory to assume the responsibility of the supplier.

6, product design change or repeal

Inventory includes not only finished goods inventory, but also semi-finished goods inventory, raw material inventory, outsourcing processing inventory and dealer (agent) inventory. Many products have to be changed in design, upgraded or abolished due to functional defects, policy changes or changes in market demand, and raw materials, semi-finished products and finished products will be in stock.

In addition to the above common reasons, the high inventory of enterprises is often not caused by a single factor, and the reasons may be various. Behind the high inventory, it is more caused by imperfect processes, systems and systems. Excessive inventory is not very beneficial to enterprises (except speculative low-cost procurement), so it is very important and necessary to eliminate excessive inventory. So, how to effectively reduce inventory? The following summarizes the eight countermeasures to reduce inventory:

1. Promote inventory management to a strategic level.

Establishing a perfect process and system to manage inventory, from the front-end sales forecast and demand, to the middle production and assembly, and then to the back-end procurement, requires strict process control and must be continuously implemented and implemented from top to bottom within the company.

2. Measure the risk of inventory to sales forecast.

Sales expectations are always full, and actual sales are always pessimistic. For the sales forecast that has not landed, we must first evaluate the support degree of finished goods inventory to sales. The sales forecast is 100 units, and the actual order may be only 70 units, so it is necessary to measure the ability of low inventory to support sales forecast, or reduce the risk through mass production and mass delivery.

3. Improve the procurement management system and procurement strategy.

Considering the comprehensive procurement cost, high-value parts can be purchased on demand; The median spare parts can establish a certain number of safety stocks according to the production plan and implement the minimum batch order; Low-value components do not occupy too much money, and EOQ can be used.

4. Establish the coordination mechanism of the whole supply chain.

The sales end establishes close communication with customers to improve the accuracy of sales forecast and realize the rapid and accurate transmission mechanism of sales and operation plans; The operation department arranges a reasonable production plan according to the demand plan; The logistics department establishes distribution and storage network, determines the best storage mode and transportation mode, and improves the flexibility of the supply chain.

5. Reduce the delivery time of suppliers.

The uncertainty of demand forecast always increases with the increase of time, the delivery cycle of suppliers is too long, and buyers need to build too much inventory to reduce risks. Especially for global procurement, long-term changes in transportation, politics, war and trade routes will affect the delivery time and the company's inventory. Analyze the impact of this long-term purchase, reduce the delivery time of suppliers as much as possible, and choose a reasonable delivery method.

6. Implement lean inventory management projects.

Push suppliers to help implement VMI (Vendor Managed Inventory), JIT (Instant Delivery), milk operation, etc. It can effectively reduce the inventory quantity and even realize zero inventory by pulling the supply with actual demand and extending to the procurement and sales links through PFEP (every part is planned), and establishing a tracking system for each material to identify and reduce unnecessary waste.

7. Improve the reliability of product development.

Many enterprises develop new products, release the first version of drawings without performance simulation and testing, and then constantly change the drawings, resulting in a large number of samples, raw materials and semi-finished products being scrapped. The uncertainty of product development and design will not only increase inventory, but also increase the uncertainty of the whole supply chain.

8, the introduction of third-party logistics support

Third-party logistics service providers have more professional warehousing, logistics, distribution system and information technology platform support, and the cost of self-built logistics and warehouse is very high. Introducing third-party logistics service providers or third-party supply chain management companies and outsourcing non-professional and non-core businesses can effectively reduce warehousing and logistics risks, improve inventory turnover and capital turnover, and reduce operation and management costs.

Conclusion: Inventory turnover rate and cash turnover rate are related to the efficiency of capital utilization, profitability and even survival of enterprises. Reducing inventory and preventing unnecessary inventory waste is a problem that can be alleviated but cannot be completely eliminated. Reducing inventory is not a quick and effective activity, but a long-term activity, and inventory is easy to repeat, which needs continuous attention and management.