CITYWIDE: COMPREHENSIVE INVENTORY MANAGEMENT

5-C
CITYWIDE: COMPREHENSIVE INVENTORY MANAGEMENT
Problem Identification:
Monitoring City departments’ actual need for materials and supplies is difficult given the largely decentralized approach to assessing and managing inventory needs.

Recommended Action:
Reduce the level of expenditures for materials and supplies through a comprehensive Citywide approach to inventory management.

Classification:
Cost Savings, Organizational

Functional/Operational Area:
Citywide

Estimated Annual Impact:
$1,000,000

Estimated Implementation Costs:
Can be accomplished with existing resources.

Barriers to Implementation:
None

Projected Implementation:
180 days

Next Steps:
Vest an intergovernmental team with responsibility for monitoring departments’ annual needs for materials and supplies, eliminating or reducing slow-moving inventory items, and identifying inventory-related facilities and building space that could be consolidated and/or eliminated. Arrange site visits to the departments that have historically exhibited the highest level of expenditures for materials and supplies to assess the effectiveness of their warehousing operations and gauge their actual inventory needs.

Analysis:
The five departments analyzed during the course of this Management and Efficiency Review project had an aggregate FY2000 operating budget of over $790 million. Of that figure, $34.5 million’4.4 percent’was appropriated for the purchase of materials and supplies.

While the Finance Department’s Bureau of Purchases maintains responsibility for procuring supplies, services and equipment for most City agencies, it has no responsibility for evaluating departments’ actual inventory needs or the appropriateness of existing inventory levels. Given that expenditures for materials and supplies represent less than five percent of the studied departments’ total operating budgets for FY2000, this area of departmental expenditures receives comparatively little scrutiny from either departmental leadership or central administration offices.

There exists a tremendous opportunity for the City to achieve significant cost savings through the more efficient and effective management of its materials and supplies inventories. Opportunities for cost savings include: reducing the City’s annual expenditures for materials and supplies, reducing inventory storage needs, reducing the level of slow- and non-moving inventories, and the creation of an investment recovery function responsible for turning surplus equipment and obsolete inventory into value through the use of recycling, redeployment, reselling, and other innovative techniques.

If an intergovernmental team made up of representatives from the Finance Department (Bureaus of Purchasing and Budget) were able to identify areas resulting in a three percent reduction in the level of materials and supplies expenditures within the five studied departments, the level of savings would exceed $1,000,000. Expanding the effort beyond the scope of the five departments studied herein could result in much greater savings.