5-4 Develop, Finalize, and Implement Inventory Control Plan

Inventory is used to ensure the availability of materials required in successive stages of the supply chain. However, inventory represents an invested cost that adds no direct value to the product being produced and therefore can be a significant contributor to the TCO. While inventory is sometimes necessary to smooth the step between sources and use, it should be minimized wherever it will reduce the TCO. This risk should be managed through speed and flexibility, not quantity. Caution should be exercised by the purchase/SCM team to avoid simply pushing inventory responsibilities back to the supplier because this may in fact increase the overall costs and risks.

Where inventory is appropriate (e.g., supplier or Postal Service centralized, regional, Districts, or stockrooms), an inventory control plan aids in managing inventory (material on hand to support requirements), so the range (number of items) and depth (quantities) of inventories are kept to a minimum level necessary for effective client support. Again, the focus needs to be on speed and flexibility, not quantity.

The development, finalization, and implementation of the inventory control plan informs decisions on:

Cost-effective and feasible arrangements that place the risks and related expenses of inventory on non-Postal sources of supply, including direct delivery contracts or JIT purchasing, should always be considered. JIT is a management philosophy that strives to eliminate sources of manufacturing costs by having the right part in the right place at the right time. Where direct delivery or JIT approaches are used by the purchase/SCM team, the team must work with the supplier to optimize the supplier’s inventory costs.

The following elements can be applied to every level of inventory: