Inventory Management

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For most retail and wholesale distributors, the largest asset on the balance sheet is inventory. The level of sophistication by which firms manage their inventory investment varies widely from company to company. For some distributors, paper-based reports are used to determine purchase order quantities as part of a periodic vendor review cycle. For others, buyers use sophisticated computer systems that maximize service levels by optimizing inventory levels and assortment based on item-specific demand patterns.

KOM International works with distribution companies to improve service levels and simultaneously reduce inventory assets through improved purchasing and inventory management systems and processes.

KOM International's inventory management services include:

• Purchasing Audit
• Purchasing and forecasting systems
• Integration of purchasing and distribution functions

Purchasing Audit

KOM International provides audits and reviews of the inventory management function to assess if any opportunities exist to improve how inventory is procured. An audit or review is intended to uncover inconsistent purchasing practices, software systems that may not be used as intended or buying practices that generate excessive costs in the distribution center.

Some examples of the benefits of past KOM purchasing audits are below:

• Buyers being measured on service level and inventory turns with little or no consideration of warehouse space utilization
• Purchasing practices that reduce inventory levels but generate excessive receiving and putaway labor that outweighs the benefits of any inventory reductions
• Purchasing items in multiple quantities, such that excessive labor is required to configure inbound pallets to fit into the racks
• Paying excessive amounts for inbound freight due to missed inventory consolidation opportunities

To conduct an audit, KOM International studies detailed purchase order history information in conjunction with sales and inventory information to assess the cost benefits of changing existing purchasing practices. It is not uncommon that companies experience significant benefits in inventory reduction, improved fill rates and reduced warehouse labor.

Purchasing and Forecasting Systems

For companies seeking to invest in purchasing software technology to improve management, KOM International assists in the process of:

• Identifying the business requirements
• Software selection
• Software implementation

There are numerous purchasing and demand planning applications on the market and many of them are specialized in specific industries or contexts. KOM International provides the expertise to quickly identify the right solutions to evaluate, based on budget and business requirements.

Integration of Purchasing and Distribution Functions

Even in the most sophisticated companies, the level of integration between purchasing and distribution can be less than optimal, which can result in significant inefficiency and lost profit.

Traditionally, the purchasing and distribution departments do not report to the same manager within the organization structure. Each functional department has its own goals to achieve, without necessarily being concerned about what's best for the entire company. Some examples follow:

• A buyer has entered into a vendor managed inventory program to reduce inventory levels by receiving a supplier's product lines daily but the additional cost of receiving and putaway labor in the distribution center is greater than the benefits of reducing inventory assets.
• Excessive inventory adjustments in the distribution center are causing buyers to be penalized for poor service levels. In turn, buyers over-purchase inventory to compensate for inaccuracy issues.

KOM International helps companies to improve the level of integration of the purchasing and distribution functions through changes in training, processes, organization structure, communications and reports, and technology.

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