Introduction:

Inventories constitute up to 50 % of current assets in the cement companies and therefore have a major influence on both costs and liquidity of a company. There is, hence, a need to maintain inventories at levels, which, while ensuring that operations are carried on smoothly, do not result in unnecessary blocking of scarce funds. An inventory management study can help a company reduce its inventory costs.

Coverage/ Methodology:

It is observed that inventory levels at most plants are driven by “safety” considerations resulting in excessive stock levels. Significant opportunities exist for reducing overall investment in inventories, while ensuring that production is not affected due to non-availability of stocks and spares. These opportunities arise from a change in approach, from safety-based to risk-based. This implies recognition of the risk of stock-outs, covering both the probability of occurrence as well as the severity of consequence; and maintaining inventories at levels, which appropriately mitigate this risk.

The opportunity is even greater for companies, which are multi-locational or have a high degree of standardisation in plant equipment at these locations.

The approach is summarised in the following steps:  

• Determination of defect and failure risks in plant, plant sections, equipment and machines, encompassing both past history and potential of failures.
• Establishment of a risk policy with the customer, i.e., what part of the total risk should be eliminated, reduced, transferred or retained.
• Optimisation based on extensive data collection from the plants and the processing of this data, using standard as well as proprietary quantitative tools e.g., dynamic inventory models, probabilistic analysis, decision trees, risk-based inventory management, etc.

Recognising the fallacy of concentrating only on the technical issues involved, Holtec strongly recommends the institution of measures, to harness the human issues related to implementation. These include, increasing all-round awareness of the importance of inventory management, continued process involvement, demonstrated top management support for the inventory program, introduction of system to reward good inventory performance, etc.

Therefore, Holtec proposes the constitution of a customer team to be involved from the very beginning in the project execution and implementation.

Benefits:

It helps in optimizing inventory levels and reducing cost of inventory.