Inventory Management Title: Avoiding Obsolete Inventory Reaction According to the article by Rick Pay entitled Avoiding Obsolete

Inventory, Obsolete inventory is one of the largest components of inventory cost and often is larger and more costly than executives are willing to admit. I strongly agree on this article because there are products or items in the inventory where in they are only sleeping on the shelves and some are not sold because it is already expired. I believed that through improving the sales and operation planning or also known as (S&OP) it could lessen the growth in obsolete inventory and error in forecasting. Through strengthening the Sales and Operation planning the supply and demand planning process are closely being integrated which allows the company to provide the products or services at the right time in the right quantity at the least possible costs. Thus according to the research of the Aberdeen Group profitability could be increased by 40% due to the proper handling of the Sales and Operation planning. In addition, the company should always consider the factors that could trigger the changes on demand so that there wont be excess in the inventory. Also the use of auto replenishment would also help in decreasing the amount of obsolete inventory. Through the use of the Vendor- managed Inventory and Kanban it reduces the supply uncertainty. The vendor-managed inventory reduced the stock outs, excess inventories, handling and transaction cost. On this system the suppliers are the one to visit the company and they are the one who determine the needed amount of inventory and they are the one to order and receive it. On the other hand the Kanban system is a two bin system where in it uses a card or other things that would signal the other party to replenish the inventory. By using the Kanban system

the company are only to order the products once that one of the bins is empty. Through this the company are able to avoid stock outs on their products. In my perception these two systems improve the inventory turnover of the company and increase its accuracy on handling the items on the inventory. However, in my own perception the best way to avoid or reduced obsolete inventory is the use of the technique called ramp up/ramp down. The ramp up/ ramp down process introduce new products or parts on the inventory system and prevent overstocking due to errors on forecasting. I believe that this technique is one of the best ways to avoid obsolescence in the inventory because during the ramp up process the company gives its attention to how the people would respond to their products or services. Thus, they would keep their suppliers close so that whenever there are changes on the plan or there is a need to replenish the items in the inventory it would be fast and easy. In addition, the use of commonality on the parts would also be a great help to lessen excess stock. On the other hand, the ramp down process is when the company reduces the number of product or parts to be ordered because they have foreseen that these products would not be able to sell on that particular cycle. I also believe that the use of ABC method of inventory control would also be of great help in reducing the obsolescence in the inventory. If companies would be able to determine and segregate the products that are easy to sell from the products that are slow moving it would be an advantage for the company for they will have an idea of the products that they would have to reorder next cycle. As for the Philippine setting the Filipino people have a very optimistic view on the products, to the point that they believe that even though the products have a very slow pace on

the market eventually it would still be sold. However, there are products that are perishable or have a very short shelf life wherein these products have to be sold right away we cannot wait for the products to be sold or else it would be no longer saleable to the market because it already passed its due date. This tells us that techniques in managing inventory are very important because the company have to be aware on what is happening to the inventory level to maximize the companys profitability.