Cost Reduction and Control Best Practices: The Best Ways for a Financial Manager to Save Money, 2nd Edition

Chapter 11

Inventory Costs

BEST PRACTICES

EMERGING COST-CONTROL PRACTICES

What’s happening among the top practices, according to a recent IOMA survey-called Best Practices in Inventory Management and Cost Control? In reviewing the top practices this year (see Exhibit 11.1), the following were observed:

Exhibit 11.1 Inventory Cost-Control Best Practices

• Periodic review of inventory remains the number-one best practice, but it is slipping. Even though it remains on top, as it has since the inception of the survey, its margin over the perennial number-two practice (more tightly manage usage rates, lead times, and safety stock) has declined to 6.8 percentage points, the closest spread since 1997. Typically, there has been a double-digit difference, with the widest margin (16.7 points) reported in 2002. Another sign is that for the first time since 1999, the periodic review practice garnered less than a 60% response. The periodic review process has become ingrained as a “routine” practice and is in wide use as an inventory management tool—so much so that inventory managers are moving on to other tools to gain advantage.
• More tightly manage usage rates, lead times, and safety stock: is this the next preferred top practice? If the surge among respondents from larger organizations (facilities with more than 500 employees) is any indication, this annual runner-up practice could very well ...