It’s a tricky business! Higher Sales vs. lower Inventory, When the order to Cash performance is directly impacted due to a shortage situation. Can we go beyond the traditional approach like monthly stock strategies (or weekly), and safety stock base?

What are the challenges? What are those influencing factors? What are the factors affecting it? Is there a benchmark? Let’s find out.

MRP Means “Material Requirement Planning”. In simple terms, the objective of MRP is to ensure the right quantity of ingredients (or components as we call it from business to Business) at the right time at the right location.

Okay, What is the Big Deal on this? Yes, it is a big deal as we have seen companies with complex businesses (Like Machine tool Industries) increase their revenue to close to 50% in the first year by streamlining their MRP and eliminating shortages – (of course this was the result of a bottleneck elimination, for another company it was a significant reduction in working capital to the tune for 60 Million about 1.5% of working capital reduction.

In this Blog, we are taking a peek at not only the pure planning i,e the Calculation based on a BOM (Bill of Materials and its components), but the larger picture involving various strategies and possibilities right from simulations, stocking, coverages, and not the least the profitability planning beyond the working capitals.

MRP Means “Material Requirement Planning”. In simple terms, the objective of MRP is to ensure the right quantity of ingredients (or components as we call it from business to Business) at the right time at the right location.

Okay, What is the Big Deal on this? Yes, it is a big deal as we have seen companies with complex businesses (Like Machine tool Industries) increase their revenue to close to 50% in the first year by streamlining their MRP and eliminating shortages – (of course this was the result of a bottleneck elimination, for another company it was a significant reduction in working capital to the tune for 60 Million about 1.5% of working capital reduction.

In this Blog, we are taking a peek at not only the pure planning i,e the Calculation based on a BOM (Bill of Materials and its components), but the larger picture involving various strategies and possibilities right from simulations, stocking, coverages, and not the least the profitability planning beyond the working capitals.

First and foremost the disclaimer, no one strategy fits all. Every industry is unique and has its own challenges and business environment. It is a pick-and-choose model that suits our industry best, here I am only talking about various options and may also mention some of this industry. As such here are a few factors that help you to set up your strategies.

If you have not already done so, Benchmarking your inventory as a percentage of your Daily, Weekly, and Monthly turnover is a good idea to know where you stand. This will bring up some interesting insights about your stock-holding patterns.

Additionally, a few of the reports mentioned below will also help us understand the efficiency of our planning.

Considering the above factors, organizations should redraw their procurement policies, and practices. Ideally, a yearly simulated plan with optimistic, pessimistic, and realistic views will help draw the procurement plans and inventory levels to maintain at the optimum level.

One of the key challenges and a major factor in achieving this result is making the planning system driven. This eliminates unwanted interference and consistency in the planning process. It also ensures the trust level in the inventory and process are at the peak and has a uniform view across the stakeholders with a view of realistic fulfillment dates.
Below are some of the proven results which we have observed by putting the above things into practice.

Please note as above to get the best results we need to look at the current challenges and adopt which best suits your industry, not by assumptions but by facts and corrections.
We expect a lot of things need to be put in place to achieve this

Nevertheless, it is worth the effort as the benefits for the stakeholders are immense and the results are long-term.
Reach out to or write to us for a detailed analysis.