Assessment of Benefits of the Efficient and Accurate Inventory Management to DLA
In most cases, efficiency and effective management of an inventory is essential in expanding the market reach of a given organization, increasing the sales volume as well as ensuring efficiency in the delivery of the services of the organization to the customers. Buoyed by the integration of technology through the partnership with several established companies, the Defense Logistics Agency has immensely benefited from the interventions put in place by LMI to manage its inventory. From the initial stages, the organization was determined to expand its service delivery, scale down its inventory, efficiently manage items, and addressing the infrequent demands from the customers. In this regard, the DLA contracted the LMI to realize these targets without sacrificing mission-readiness effectively. Through the use of the Next Generation Inventory Model and Peak Policy approach, LMI has made astounding strides in dealing with the inventory of DLA. The applications and the methods in place have effectively ensured that DLA stares at improved paces as far as inventory management is concerned. The following are the benefits of effective inventory management by LMI by DLA.
First, through the application of the Next Generation Inventory Model and Peak Policy tools, DLA has realized an improved accuracy in the demand forecast. As opposed to the traditional approaches that were prone to invariability and infrequency in demands resulting in excess inventory and deteriorated customer service, the application of Peak Policy and Next Generation Inventory Model tools have immensely improved inventory management. Collectively known as PNG, these tools that LMI employ in managing the inventory of the DLA does not follow the traditional steps of forecasting demand. Instead, it thrives in forecasting unforecastable items and subsequently uses various strategies meant for risk-hedging. The approach directly dictates the levels of the supply based on the characteristics of item and demand history as forecasted.
Again, DLA has realized improved service delivery and efficiency in its operations since the implementation of the PNG tools by LMI. Being one of the most prominent logistical organization tasked with delivering varied items in different locations globally and with over $5 billion working capital, DLA required a sound service delivery mechanisms anchored on efficiency. Thus, such a need is addressed through the deployment of the PNG tools. These tools have varied platforms that provide the users with the potential to make three-way tradeoffs, effectively handle procurement requests, and reduce the customer wait time. Consequently, the PNG tools have attained reduced procurement requests while, on the positive note, made modest enhancements in inventory investments.
On the other hand, DLA continues to enjoy inventory reduction and expanded sales. Based on the case study, one of the priorities of the DLA was to reduce their inventory by over 25 percent when LMI got contracted. Such development would automatically translate to expanded sales and increased demand for items. Consequently, as of the year 2013, the implementation of PNG tools translated to the sale of 500,000 items, which translated to over $3.6 billion in revenues after purchase. There are projections that with the expansion of the demand items to 800000, the sales would grow by over $1 billion. Such an aspect, as forecasted, would further drive down the inventory for three consecutive years, an element that will enhance customer service as well as reduce the workload related to procurement. The workload will be reduced by over 50 percent, while the inventory is reduced to $180 million. Such strides align with the expectation of DLA in managing its inventory.