Let us make it easier
The goal at KDL is to have exactly the right amount of inventory (and no more), in just the
right places, at just the right time in order to meet on-time delivery requirements.
In the past, it was common for manufacturers to carry too much inventory in order to avoid part
shortages. This approach achieved its goal, but was ineffective at reducing the amount of working capital
tied up in inventory. At KDL we implement methods to determine the right inventory levels for each
part and keep working capital under control.
Inventory can be broken down into nine categories: anticipatory stock, cycle stock, early arrival
stock,
marketing stock, obsolete stock, pipeline stock, prebuilt stock, and safety stock.
From Logistics Management:
Cycle stock is the inventory due to production frequencies. Early arrival stock is due to uncertainties in coordinated delivery times. Marketing stock is additional inventory placed at customer locations to stimulate demand or satisfy retailer shelf-space requirements. Obsolete stock is an inventory of unsalable products that are often left on the books for accounting and finance purposes. Pipeline stock is based on the lead times in the supply chain. Pre-build stock is inventory built ahead of demand due to capacity limitations. There are several classes of safety stock each specific to a type of variability; be it forecast variability, supply variability, or manufacturing variability.
