Avoiding inventory pitfalls
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Dan Gilmore has a good article over at SupplyChainDigest detailing all of the pitfalls that lead to inventory problems. His list includes most of the main sources of problem. But, I think there’s another that’s only hinted at here.
Most companies account for uncertainty by increasing inventory throughout the supply network so it can serve as a buffer against the unexpected. However, that’s a strategy that treats inventory as an asset (which makes sense for financial accounting) when it’s really a liability.
Charlie Barnhart of Technology Forecasters, Inc. (TFI) (TFI blog) has written a good paper talking about this issue. With the pace of change - volatile demand, short product lifecycles, etc. - inventory is a liability. What companies really need to do is attack the root cause of inventory buildup, which is their inability to respond quickly and decisively to constant change. If you empower people with the information and tools to respond to change when it happens, you’ll see a dramatic reduction in the need to create costly inventory buffers.
