Operations Management: Processes and Supply Chains, 12th Edition

Inventory Reduction Tactics

Managers are always eager to find cost-effective ways to reduce inventory in supply chains. In this section we discuss the basic tactics (which we call levers) for reducing cycle, safety stock, anticipation, and pipeline inventories in supply chains. A primary lever is one that must be activated if inventory is to be reduced. A secondary lever reduces the penalty cost of applying the primary lever and the need for having inventory in the first place.

Cycle Inventory

The primary lever to reduce cycle inventory is simply to reduce the lot sizes of items moving in the supply chain. However, making such reductions in Q without making any other changes can be devastating. For example, setup costs or ordering costs can skyrocket. ...