Supply Chain Blog

3 reasons why multinationals are still struggling with inventory

Posted by Michael Thompson on Wed, Nov 18, 2015
Last week I had another chat with a client about inventory.The essence of the client's problem was - "Why can't we get our stock right?  We either have too much …. or run out … and we have just spent a fortune on a new IT system …."

Sound familiar? I have had variations of the same discussion dozens of time and it boils down to this for most manufacturing-based organisations:

  • Inventory_stocklevel_supply_chain_question.jpgDo they know the ideal level of inventory that will deliver their target service levels?
  • Do they know what needs to be changed to achieve these targets?
  • Do they really understand what is actually happening with their supply chain? 
If they are honest, often the answer to at least one of these is "no". In the last 10 years or so, despite investments in sophisticated systems, there are still huge opportunities to improve supply chain performance, particularly for large global supply chains. Why is this? I believe that there are three reasons:  
  1. Poor Diagnosis.  In efforts, often motivated by internal politics and attempts to apportion blame, there is an incorrect diagnosis of poor performance.  Root cause is not always if ever addressed.  For example, the forecast is often blamed - “if only we had a decent forecast …”. In reality the issue often lies within the supply chain processes, incorrect supply chain policy, the set-up of the IT systems or how the tools are being used.
  2. Complexity.  Managing supply chain complexity, especially for multinational organisations, is a real challenge.  Many operate in 100’s of markets around the world, have a factory footprint of dozens of factories, 100’s of warehouses and serve 100’s or 1000’s of direct customers.  To protect themselves, supply chain managers in these businesses are buffering supply chains with inventory and lead-times.
  3. Complex IT Projects.  Often large IT projects (e.g. SAP/APO upgrades) automate traditional ways of working.  This can result in little improvement or sometimes things are made worse with increased noise and nervousness in the planning processes.

So what is the solution? I believe that before a ‘technical solution’ can be found (and there is always a technical solution), certain internal issues need to be addressed. I will deal with these in my next blog. 

In the meantime, please do share your organisation’s inventory story.

Image courtesy of niamwhan at FreeDigitalPhotos.net

 

 

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