Designing ordering and inventory management methodologies for purchased parts

This article presents a method for redesigning the ordering and inventory management methodologies for purchased parts in a manufacturing firm. The method takes the perspective of the purchasing and logistics manager, defines clusters of purchased items, and subsequently assigns each cluster to a suitable way of ordering and inventory management. An application of the method, resulting in an 11 percent overall supply costs reduction proposal, is presented. The application shows that the method is particularly suitable for a first, rough redesign of the existing - usually undifferentiated - way of ordering and managing inventory. In addition, the method may provide a clear format for collaboration among the various disciplines involved in the redesign process.