Critical item techniques for intensive inventory management

Abstract

Capital shortages have become one of the most common and international problems faced by business and governmental organizations. The universal impact of insufficient operating capital has been a limitation upon the operational flexibility of the firm or agency. Inventories, because of their insatiable demand for working capital, are a popular victim of the economy axe. Too often these cuts are made without compensating changes in physical distribution procedures. A cut in the inventory level will change the configuration of material flow within an organization. An immediate impact of such action is a reduction in ability of the system to absorb shocks or surges from fluctuations in demand and supply. A reluctance of management to accept these shocks, while also realizing that no economic alternative is available, may contribute to the despair noted in many responses to a recent survey on control of customer logistics service. If a concerned management is willing to invest a small portion of saved capital from inventory cuts in a more responsive distribution control system, a majority of its system shocks may be eliminated — even in the absence of safety stock levels.