Cash Or Carry

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There is an old saying that the deal "Cash is king." Inventory, regardless of the type of bonds and cash away from other uses. Therefore the objective of inventory management is necessary to minimize the inventory investment for a specified level of customer service. This approach should ensure that the target service level is met, while minimizing the investment in cash. Again, this will maximize the overall benefit to the company.

To achieve this goal, many companies adopt the techniques of supply chain management without the realization that the effectiveness of these methods is restricted to a certain type of inventory. This is a direct inventory. These companies do not realize that their indirect inventory as parts and components, finished products, OEM spare parts, engineering parts, industrial supplies and MRO inventory, which is a more complete. As a result, the possibility of releasing this kind of money people are often disproportionately large stock of investment.

Some companies are completely different point of view, but treated as inventory costs, and particularly in the case of MRO inventory. Perhaps to expect with companies who have no other resources (eg services), but in fact is the case for many types of businesses, including those in manufacturing. For many engineers inventory problem is not serious business, inventory is to count and storemen book store. The average maintenance engineer questions are Uptime and reliability. Spares expand and improve the reliability Uptime that are available if needed. It is their issue and not the availability of inventory reduction. However, if they realize this or not, the purchase of MRO inventory investment is a cash society. The use of money which may or may not be better spent on each purchase or any other part of the company's capital.

In an environment where downtime is expensive and relatively speaking the cost of each of the parts are cheap, easy to justify carrying any number of spare parts. In this case, MRO inventory is seen as a safe. This approach often results in the purchase of MRO supplies and then invest in stocks either. In this case, MRO inventory investment is forgotten.

However, if you see MRO inventory investment as the course will manage inventory in different ways. Our goal is to maximize the return on investment. This does not mean that the risk of our operating results, but this means that there is no excessive or unnecessary inventory investment. This means that the administration knowingly cash investment. The challenge facing MRO inventory, and all is whether the inventory management of free cash or carry the inventory.

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