Supply Chain Blog

2 issues to address before you can optimise inventory.

Posted by Michael Thompson on Wed, Nov 25, 2015

Inventory_optimisation_issues_fmcg.jpgIn my last post I dealt with the long-standing issue of inventory optimisation and some of the reasons that many organisations are still struggling with it. If it was just left to a technical challenge, optimising an organisation’s inventory, whilst never straight forward, would at least be doable to an extent.  However, we are dealing with people in organisations; often many people and each person has an opinion, an ego and a career to protect and progress. In working on supply chains for well over 20 years, I have found that many of these people issues can get in the way of sorting things out and this includes with respect to inventory optimisation. So here is my recipe for the two that must be addressed before any organisation can optimise its inventory. 

  • Cut out the blame.  Nothing quite lends itself to blaming others than the causes or perceived causes of poor inventory management - too much, too little (stock outs), never the right amount to satisfy anyone. Whether it is supply chain management ("if only we had a decent sales forecast"), sales management ("why can't the planners give us enough stock?"), purchasing management ("we should order more or we will be blamed again when the stock runs out") …. and so forth.  A decent Sales & Operational Planning (S&OP) process can cut through a lot of the blame culture but sometimes this is only a start. Something else is needed.
  • Stick to the facts.  I have found that the single most effective way to cut out blame is to stick to the facts. At its most basic every supply chain management team (or S&OP Team) needs a decent set of supply chain KPIs or metrics. These can change an emotional exchange (at a pre-S&OP meeting for example) into an objective decision making process.

Sometimes, however, we need something more. If it was just down to a decent S&OP process supported by KPIs, inventory optimisation would be much easier than it is in practice. This something else, I have found, can be a deeper and more thorough analysis, sometimes referred to as supply chain analytics.  I will deal with this in my next blog with a real example. In the meantime, please do share your organisation’s inventory story.

Image courtesy of Ambro at FreeDigitalPhotos.net

Tagss: Michael Thompson, Inventory Management & Stock Control, Supply Chain Analytics, Integrated Business Planning