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A new focus on inventory performance and bottom-line profits
1IQR International, Los Angeles, CA, USA.
Hospital Materiel Management Quarterly
|October 4, 1996
Summary
This study introduces a dollar-focused approach to inventory management, using data from planning systems to set reduction goals and measure performance. It explores performance bonuses and showcases inventory reduction successes.
Area of Science:
- Operations Management
- Supply Chain Management
- Financial Management
Background:
- Inventory management significantly impacts financial performance.
- Existing materiel requirements planning (MRP) systems offer valuable data for inventory control.
- A need exists for improved methods to measure and manage inventory performance.
Purpose of the Study:
- To present a novel method for measuring inventory performance with a financial focus.
- To demonstrate how to leverage existing system data for inventory reduction.
- To evaluate the effectiveness of performance bonuses in inventory management.
Main Methods:
- Utilizing data from Materiel Requirements Planning (MRP), MRP II, Enterprise Resource Planning (ERP), Distribution Requirements Planning (DRP), and orderpoint systems.
- Establishing inventory reduction objectives based on financial impact.
- Segmenting inventory for performance measurement and continuous improvement monitoring.
Main Results:
- Information from planning systems can be effectively used to set inventory reduction targets.
- Performance can be measured by inventory segment, enabling focused improvement efforts.
- The study reviews successful inventory reduction outcomes and discusses performance bonuses.
Conclusions:
- A dollar-focused inventory management strategy enhances performance measurement and drives continuous improvement.
- Integrating data from various planning systems is key to successful inventory reduction.
- Performance incentives may positively influence inventory management outcomes.