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Chicago ConsultingSupply Chain Consultants8 S. Michigan Ave., Suite 3600Chicago, IL 60603 (312) 346-5080emailus@chicago-consulting.com
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Chicago Consulting Develops Optimal Safety Stocks
By Terry Harris, Managing Partner, Chicago Consulting Chicago, IL May 29, 2008: Chicago Consulting (www.chicago-consulting.com) announces it has developed Optimal Safety Stocks. Used extensively to manage inventory Safety Stocks establish a floor, a minimum level, of on-hand stock to buffer the vagaries of supply and demand. "Optimal Safety Stocks" are simply the best possible levels based on the capital invested in the inventory and the fill rate performance it provides," says Terry Harris, Managing Partner of Chicago Consulting. Regarding general inventory management, Harris explains "you can actually achieve virtually any fill rate performance you wish, all you need is a big bank account! So why not achieve high fill rates at an acceptable cost? How about the lowest cost?" He claims that Optimal Safety Stocks achieve a given fill rate at the lowest possible cost or, alternatively, the highest possible fill rate at a budgeted cost. Safety Stocks are one of two fundamental "levers" managers have to control inventory, the other being Order Quantities—the amount ordered when a re-order is placed. Of the two, Safety Stocks and Order Quantities, Harris says that Safety Stocks are by far the more effective lever in most businesses. Chicago Consulting developed the optimal approach and software that "bolds-on" to companies’ current inventory systems and "turbo-charges" them. The bolt-on approach reduces implementation times to a matter of days. Harris claims the firm’s clients have achieved capital investment reductions of 15 to 30% and fill rate increases of 5 to 15 percentage points. "It’s particularly effective in complex businesses with thousands of items all with a variety of velocities, costs, lead-times, package quantities and so on," he said. Optimal Safety Stocks employ sophisticated computational technology and processes to specify the Safety Stocks of each item throughout a supply chain at the item/location level—"that’s the lowest possible level of detail," says Harris. The firm offers to Pilot its Optimal Safety Stocks on a companies business with their data. The Pilot quantifies the capital savings and fill rate increases its technology would achieve. Contact Terry Harris Chicago Consulting (312) 346-5080 terry@chicago-consulting.com About Chicago Consulting Chicago Consulting designs supply chains for manufacturers, distributors and retailers. It orchestrates supply chain components such as procurement, warehouse networks, inventory deployment, transportation and warehouse operations. From offices in Chicago and Shanghai the firm has applied advanced techniques to design supply chains for over 20 years. Further information can be found at www.chicago-consulting.com |