Stock Value Reduction
In a constantly changing market, in an extremely flexible business environment in terms of customer demand and preferences in which the need for research and development of new products is increasingly important, there is a need to have available as much of business cashflow.
In general, in industries, stocks (of raw materials, sub-assemblies and finished products) represent from 45% to 75% of the working capital of companies. Hence the need for an efficient control of the stock level.
Reducing the level and value of stock is the basic activity of Supply Chain Management. Stock control is a multidisciplinary activity involving elements of planning, production, engineering, finance, procurement and logistics, with the aim of reaching the optimal level of stocks (without interruptions in production, without interruptions in the supply chain, with efficient use of storage space storage)
One of the methods of control, identification of opportunities and action in the case of reducing the value of stocks is the definition and implementation of the ABC/XYZ analysis. The implementation steps are:
When implementing the ABC/XYZ solution, it is necessary to involve all the departments listed above, especially in the standardization of the solutions, because both the increase in the value of stocks and their decrease are generated by the entirety of a team, not just by a single part of it, and require responsibility in this regard.
In general, in industries, stocks (of raw materials, sub-assemblies and finished products) represent from 45% to 75% of the working capital of companies. Hence the need for an efficient control of the stock level.
Reducing the level and value of stock is the basic activity of Supply Chain Management. Stock control is a multidisciplinary activity involving elements of planning, production, engineering, finance, procurement and logistics, with the aim of reaching the optimal level of stocks (without interruptions in production, without interruptions in the supply chain, with efficient use of storage space storage)
One of the methods of control, identification of opportunities and action in the case of reducing the value of stocks is the definition and implementation of the ABC/XYZ analysis. The implementation steps are:
- Identification of all items in stock, quantity and value
- Defining the desired stock level for each item in the stock (calculation of safety stocks, order point, calculation of Minimum Ordering Quantity based on transit times, proposals to improve supplier performance)
- Definition of ABC categories (based on item value)
- Definition of XYZ categories (based on item movement)
- Definition and implementation of the ABC/XYZ matrix
- Definition and implementation of standard actions based on the categories in the matrix
- Running actions, possible risks and reducing stocks
When implementing the ABC/XYZ solution, it is necessary to involve all the departments listed above, especially in the standardization of the solutions, because both the increase in the value of stocks and their decrease are generated by the entirety of a team, not just by a single part of it, and require responsibility in this regard.
