Our client requested to find ways to reduce the inventory level in the warehouse, based on the type of items and forecast. In addition, they would also like to reduce the overall cost of operations. Finally, standards for each item should be made to ensure that the inventory level of each item is optimal.
In order to achieve our client’s goals, we first classify the list of products into 3 different classes using ABC analysis. Then, we further analyze the current stock level using Pareto and the Stock Balance index. From this analysis, we select the products for monitoring. Next, we define and establish the standards for the inventory level of each item. So things like reorder point, safety stock, and lead time were defined.
Finally, a monitoring plan was created using an I/O diagram for the inventory level.
There are different outcomes obtained. The ABC analysis with the Pareto chart, stock balance index, the action plan for the different classes of products, the reorder point, safety stock, lead time, and finally, the estimated savings analysis were obtained.