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PlastiPharm has several clients whose contracts require the company to store three to six months of raw materials for them just in case they require a quick turnaround for an order, something that rarely happens. As the contracts come up for renewal, PlastiPharm intends to renegotiate the contract terms to reduce or, ideally, eliminate the inventory clause. Why should PlastiPharm care about excess inventory?

  • Reducing inventory will allow the company to eliminate, or greatly reduce, problems with materials that might become obsolete while sitting on the shelf, thus reducing waste.
  • Managing and reducing inventory will help the company be better organized and allow them to focus on other areas to improve.
  • Making changes to the contract by eliminating the inventory clause demonstrates to the client that PlastiPharm is serious about its lean management processes.
  • Reducing inventory will provide needed storage space for other items that PlastiPharm needs to store in its warehouse.
 
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