Inventory's security blanket

Inventory's security blanket

Inventory is often thought of as a waste at all levels. Problem is, before you can reduce inventory, you have to have visibility to it, which is easier said than done. On the level of a mixed blessing, the same Federal security initiatives giving logistics executives fits right now can — if managed properly — also help companies improve their supply chain visibility.

According to Brandi Hanback, managing director of the Rockefeller Group Foreign Trade Zone Services, initiatives such as the Customs and Trade Partnership Against Terrorism (C-TPAT) and the Container Security Initiative insist on specific documentation and other requirements for importers and exporters. As it happens, the same information flows that are part of the security initiatives coincide with achieving a higher degree of inventory management.

There are major opportunities for companies to improve cash flow and financial performance by making better use of this information, adds Robert Martichenko, senior general manager of corporate development for Transfreight, who — like Hanback — spoke at a recent logistics conference. Martichenko cites the example of a company that was spending $250 million on raw materials and another $9 million for transportation. Inventory carrying costs were over $3 million when the company maintained 10 days of inventory. However, by reducing the days of on-hand inventory down to five, the company was able to reduce its total costs by nearly 10%.

Reducing the number of points where inventory is stored — basically, having fewer stocking locations — also yields additional savings, Martichenko notes. Given the need to have more information on imports as well as the increased requirements for physical security, Homeland Security’s insistence on companies securing their supply chains can also help them achieve their supply chain goals.

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September, 2003

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