Published in Downstream

Inventory Management Strategy

Thursday, 19 November 2015 11:36 Written by 

In current tough O&G market situation, every cent matters. Top Management have been emphasising strongly on “Effective Inventory Management and Scheduling” and refiners in-turn are striving hard to get the levels right by:

  • Providing visibility into future demand and inventory levels, enabling the company to take advantage of supply/demand disruptions while minimizing working capital
  • Integrating refinery scheduling with distribution scheduling, yielding feasible and achievable schedules
  • Reducing transportation and demurrage costs through realistic distribution schedules
  • Facilitating deal actualization and contract reconciliation
  • Enabling visibility into supply and trading positions
  • Facilitating best-practice supply chain planning by connecting demand forecasters, refinery schedulers, distribution schedulers, traders and operations personnel

Here, we come up with top 5 questions which help you to assess the effectiveness of inventory reduction policies followed across your organization:

  • Are you able to clearly segregate your inventory into safety stock to be maintained to manage supply/distribution disruptions, stock needed for timely replenishment of retail outlets and stock which is excess or obsolete
  • Do you accurately assess and periodically retro-analyse the levels of safety stocks maintained?
  • Is the “Buy-Sell-Make” decision making in your organization a cross functional team activity or is it solely a production planning/marketing team activity?
  • Do you have clear visibility into excess and obsolete stock and do you deploy effective action plans to sell off or reduce this inventory?
  • Do you restrict inventory reduction policies only to unfinished/intermediate streams or do you extend it to all forms of inventories which includes finished products and feedstocks as well.

The diagnosis of your inventory health sets your organization up for significant opportunities to improve expense and asset effectiveness and creates potential for capturing missed top-line sales. Thus, effective inventory management can be a huge lever to improve the financial health of your organization.

Last modified on Friday, 04 November 2016 12:00
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