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Inventory: The optimization of spare parts inventory for engineering machinery companies is imperative.
Release time:
2024-09-18
Entering the stock market from the incremental market not only changes the decline in overall machine sales, but also severely reduces equipment operating rates, leading to a shrinkage in parts sales, increased inventory pressure, and heightened anxiety among agents and parts stores.
In the incremental market, companies spare no effort to ensure customer satisfaction, storing all possible repair parts in warehouses just in case. Now, these parts are just lying idle in the warehouse.
In recent years, manufacturers have shifted their market focus overseas, and the same inventory issues are repeating abroad. Due to the complexity of models and long delivery times, the problem of stagnant overseas parts is even more severe, with warehouses filled with excess, surplus, and stagnant parts, while the parts needed by users are often out of stock. After a few years, the issues of inventory backlog and scrapping will become apparent, and we should start paying attention to this matter now and continuously optimize inventory.
Market demand is constantly changing, and products are being updated. Some parts inevitably become stagnant and scrapped. The key issue is that companies must control the waste of parts inventory, maintaining an appropriate balance between inventory costs and parts availability, storing the correct parts and quantities, and optimizing inventory in a timely manner. Otherwise, useless parts will accumulate, ultimately affecting the company's cash flow and storage space, leading to losses and impacting service timeliness.
The main reason for inventory waste is the blind increase of parts. Whenever there is a parts shortage that leads to customer complaints, management will demand an increase in inventory. Increasing inventory is not wrong, but the key is which parts to increase? What quantity is appropriate? Most companies manage inventory based solely on experience, making waste unavoidable.
There are many common optimization methods in life and work, such as: the fastest route to a destination during travel, the best production time to meet demand based on production capacity, determining product shape and Size in design to achieve optimal material costs, and determining the storage quantity of parts in inventory planning to achieve the best balance between parts availability and inventory turnover.
Inventory optimization sounds simple, but there are many constraints. Optimizing under these constraints poses a significant challenge for companies.
For example: how to handle stagnant inventory? Self-consumption is impossible; otherwise, this inventory would not be stagnant. On one hand, companies need special promotions to reduce inventory, while on the other hand, suppliers or manufacturers need to establish a parts return/exchange mechanism to allow these parts to flow in a larger market.
For cost considerations, many suppliers or manufacturers strictly regulate order intervals, minimum order quantities, and order amount limits. These constraints often force agents and parts stores away from the optimal ordering point. For example, if a supplier sets a minimum order amount for free delivery at 100,000 yuan, a small company with a monthly sales of only 30,000 yuan must extend the ordering cycle for inventory orders to 3 months. While this practice reduces transportation costs, it cannot cope with the rapid changes in market demand, easily leading to shortages or stagnation.
According to the three-box inventory planning model, shortening order cycles and delivery times benefits agents and parts stores greatly, not only allowing for quicker responses to changes in customer demand but also reducing inventory amounts and minimizing stagnation risks. Clearly, many problems are self-inflicted, ultimately a struggle for interests, but the ones affected are the customers.
If the parties involved in the service value chain cannot collaborate, inventory optimization cannot yield the best results. Therefore, all parties need to prioritize "win-win" and seriously consider the following questions:
· Can the delivery time be shortened? Or is it already optimal?
· Does the company conduct demand forecasting? Does it determine inventory plans based on software?
· Can the minimum order quantity be changed?
· Is the company's inventory data timely, accurate, and complete?
· Does the company regularly and effectively dispose of scrapped inventory?
· Does the company have return and exchange policies with upstream suppliers?
· Are inventory planning personnel professionally trained? Or do they supplement inventory based on experience?
· Are the existing inventory policies and management processes appropriate?
Further optimizing delivery times, relaxing the conditions for implementing return and exchange policies, prioritizing customer interests, and challenging the constraints of existing policies and processes are necessary to achieve breakthrough improvements and realize true inventory optimization.
Otherwise, the backlog of ineffective inventory will accumulate over time, leading to significant losses on the day of scrapping. During this period, ineffective inventory will continuously occupy funds and space, requiring regular inventory counts, handling, and checking, resulting in even greater waste.
Many companies have serious waste in parts inventory, and inventory optimization can save up to 50% of inventory expenses while also improving parts availability, yielding very high returns. Unfortunately,
many companies have not yet realized the seriousness of the parts inventory problem or are at a loss, and their awareness hinders them from taking action.
Einstein said: "You cannot solve a problem with the same mindset that created it." Inventory problems will not disappear on their own, no matter how bad the current inventory situation is. By adopting the correct optimization methods and making small daily improvements, the company's operational status will improve.
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