Importance of Supply Chain visibility to cut down inventory costs
It is general notion that the market for medical goods is more or less consistent and devoid of fluctuations but the fact is even medical industry need supply chain visibility to reduce variable storage costs and obsolescence and inventory carrying costs. To have the right products at right time is the key to success and reduced costs for any industry.
Here one can site the example of Terumo Cardiovascular Systems (Terumo CVS), which saved around $1 million — in one year — by reducing its inventory by 36%. Terumo CVS is a global manufacturer and distributor of more than 1,500 finished goods like heart-lung machines, disposables including blood oxygenators, and a steady flow of custom tubing pack orders.
These products face many variations and indispensable steps in its supply chain mixed with seasonal demand, it was quite difficult to track the numerous plants and distribution centers despite its efficient forecasting system.
“Believe it or not, even medical products are seasonal,” says Kevin Doughty, Director of Supply Chain Management for Terumo. “Our three biggest sales months are October, January and March because people avoid having surgery during the holiday season.”
Finally, to increase its supply chain visibility and to track the seasonal changes, Terumo CVS implemented Demand Solutions Forecast Management and Requirements Planning in 2006. This increased their visibility into supply and demand streams enabling them to reduce their inventory by more than a third in one fiscal year with an effect of a $1 million savings. Terumo CVS’ executives also hold monthly Sales & Operations Planning meetings to make strategic decisions based on the forecasts.
To conclude, one can say that the only way to save costs in these recessionary times to increase visibility in supply chain management and thus cut down on inventory costs.
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