Drowning in inventory
by Randy LittlesonIf you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
Dan Gilmore has some good insights at SupplyChainDigest in an article entitled “How do we get so much inventory?”
In the article, Dan talks about the fact that inventory levels continue to climb and does a really nice job of describing the many root causes of this problem.
I would contend there’s one other root cause - possibly the largest. A company’s inability to respond to change. Think about it. In an ideal world, there would be no inventory. When a customer places an order, you would just build what they want and ship it. Despite the fact that literally billions of dollars have been spent trying to manage and reduce inventory, the problem isn’t going away. In fact, Dan argues it’s getting worse.
The only reason we have inventory in the first place is to provide better responsiveness. The real problem here is that despite the billions that have been spent, companies have failed to address the true root cause - their inability to respond to change. If companies are more responsive to change, the need for inventory as a buffer to provide better response diminishes significantly.
As Dan accurately points out, there are a lot of contributing factors. But we’ve seen time and time again that empowering the organization to respond more quickly and effectively to change is essential to reducing inventories.
