Inventory - attacking the root causes
David Leifsson has a post here talking about inventory technology and strategies. He cites research from the Aberdeen Group that details lots of approaches to improving inventory positions.
With the dramatic rise in outsourcing, inventory takes on a whole new set of challenges for organizations today. Fulfillment and supply networks are distributed and made up of various third parties, making it hard to tell who’s inventory it really is given the number and pace of changes.
If you want to really cut into the inventory problem, you have to attack the root causes, which is to say that you don’t focus on the inventory itself, you focus on what is causing inventory in the first place (inventory reductions will be the result of addressing the root causes). Organizations maintain inventory for really one reason - to enhance responsiveness to customers. So, if you can enhance your responsiveness to customers at an operational level, you’ll be able to reduce inventory buffers that are there for that purpose, and you can do it throughout your fulfillment and supply networks.
To figure out how to enhance responsiveness, you have to look at what is driving the need to respond today and how your organization is coping with it. If you’re like most brand owners, the number one driver is demand changes and the way your team is coping today is by using a lot of one-off spreadsheets, emails, phone calls, etc. (and because this doesn’t work so well, response mechanisms like inventory buffers tend to get “institutionalized”). Front-line decision makers are struggling to respond because they don’t have the appropriate fulfillment network and/or supply network visibility nor do they have the tools to help them respond by making the course corrections and adjustments necessary to solve the problem.
By really looking hard at the root causes and developing strategies to empower a more responsive organization, you’ll see a dramatic reduction in inventories.
