Five Reasons Why We Have Not Made Progress on Inventory Management
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The document discusses the importance of effective inventory management in supply chains, emphasizing the need for a balanced metrics portfolio to drive value. It highlights challenges such as growing inventory levels and the impact of advanced inventory software and analytics on decision-making. The author argues for a holistic approach and alignment in inventory strategies to enhance supply chain performance.
Five Reasons Why We Have Not Made Progress on Inventory Management
- 1. Cracking the Code: Inventory Management September 2018 For the Supply Chain Leader Who Wants to Rise Above
- 2. Supply Chain Insights LLC Copyright © 2018, p. 2 I Am A Social Scientist
- 3. Supply Chain Insights LLC Copyright © 2018, p. 3 I Write for the Supply Chain Leader
- 4. Supply Chain Insights LLC Copyright © 2018, p. 4
- 5. Supply Chain Insights LLC Copyright © 2018, p. 5 What I Believed
- 6. Supply Chain Insights LLC Copyright © 2018, p. 6 What I Learned: A Balanced Metrics Portfolio Drives Value
- 7. Supply Chain Insights LLC Copyright © 2018, p. 7 Today’s Reality
- 8. Supply Chain Insights LLC Copyright © 2018, p. 8 Growing Inventory Levels
- 9. Supply Chain Insights LLC Copyright © 2018, p. 9 Voice of IT
- 10. Supply Chain Insights LLC Copyright © 2018, p. 10 Voice of Business Leaders
- 11. Supply Chain Insights LLC Copyright © 2018, p. 11 WHY? 5 Reasons
- 13. Supply Chain Insights LLC Copyright © 2018, p. 13 Planning System Effectiveness
- 14. Supply Chain Insights LLC Copyright © 2018, p. 14 Data Inputs Engines Plan Outputs Align Engines with Outcomes Planning Master Data
- 15. Supply Chain Insights LLC Copyright © 2018, p. 15 • Engines: Modeling/Math • Scalability • User Interface • Collaboration/What-if Analysis • Partner Requirements • Culture • System of Record • Integration Selection Criteria for Planning
- 16. Supply Chain Insights LLC Copyright © 2018, p. 16 • Engines: Modeling/Math • Scalability • User Interface • Collaboration/What-if Analysis • Partner Requirements • Culture • System of Record • Integration Selection Criteria for Planning
- 17. Supply Chain Insights LLC Copyright © 2018, p. 17 • Engines: Modeling/Math • Scalability • User Interface • Collaboration/What-if Analysis • Partner Requirements • Culture • System of Record • Integration Selection Criteria for Planning
- 18. Use of Excel Spreadsheets
- 19. Supply Chain Insights LLC Copyright © 2018, p. 19 The Building of Excel Ghettos Isolated, Disconnected Decision-making
- 20. Supply Chain Insights LLC Copyright © 2018, p. 20 Advanced Inventory Software Makes a Difference
- 22. Supply Chain Insights LLC Copyright © 2018, p. 22 Embrace the Form & Function of Inventory
- 23. Supply Chain Insights LLC Copyright © 2018, p. 23 Form & Function of Inventory
- 24. Supply Chain Insights LLC Copyright © 2018, p. 24 Need for Holistic Thinking
- 25. Alignment
- 26. Supply Chain Insights LLC Copyright © 2018, p. 26 Inventory: Business Pain
- 27. Supply Chain Insights LLC Copyright © 2018, p. 27 Gaps
- 29. Supply Chain Insights LLC Copyright © 2018, p. 29 Normal Distribution SKU/L SalesVolume Anything But Normal Consistent and Forecastable: 874 items representing 77% of the volume and 74% net sales. 64% of the volume is forecastable with a 55% error. Inconsistent demand: 1723 items representing 23% of the volume and 26% net sales. Traditional Optimization Techniques Need for Machine Learning/Pattern Recognition: Inventory Strategy Not Forecastable by Conventional Means Client Case Study
- 30. Supply Chain Insights LLC Copyright © 2018, p. 30 • A pattern caused by order frequency, order quantity or batch size. • A type of demand: price/promotion, new product launch, seasonal consumption, special orders. • A product build to execute a supply chain strategy. Life for a supply chain planner is not as easy as it used to be. Demand Flows require aligned Inventory Strategies. What Is a Demand Flow?
- 31. Supply Chain Insights LLC Copyright © 2018, p. 31 Example: Navigating Demand As A River
- 32. Supply Chain Insights LLC Copyright © 2018, p. 32 Correct Diagnose Assess Supplier Quality Supplier On-Time Purchase Costs Dir Mtl Costs RM Inv Cost Detail Production Schedule Variance Plant Utilization WIP + FG Inventory Order Cycle Time Perfect Order Detail AP AR Inventory Total Cash-to-Cash Demand Forecast SCM Cost Perfect Order Lack of Understanding of Demand Source: AMR Research 2004
- 34. Supply Chain Insights LLC Copyright © 2018, p. 34 Today’s Supply Chain
- 35. Supply Chain Insights LLC Copyright © 2018, p. 35 Tomorrow’s Supply Chain Requirements
- 36. Supply Chain Insights LLC Copyright © 2018, p. 36 A Need for Balance
- 37. Supply Chain Insights LLC Copyright © 2018, p. 37 A Balanced Metrics Portfolio Drives Value
- 38. Supply Chain Insights LLC Copyright © 2018, p. 38 Wrap-up Inventory Strategy Matters
- 40. Supply Chain Insights LLC Copyright © 2018, p. 40 About Lora Cecere • Founder of Supply Chain Insights • “LinkedIn Influencer” • Guest blog for Forbes • Author of 5 books: Bricks Matter (2012), Shaman’s Journal (2014), Supply Chain Metrics That Matter (2014), Shaman’s Journal (2015), Shaman’s Journal (2016), Shaman’s Journal (2017) • Partner at Altimeter Group (leader in open research) • 7 years of Management Experience leading Analyst Teams at Gartner and AMR Research • 8 years Experience in Marketing and Selling Supply Chain Software at Descartes Systems Group and Manugistics (now JDA) • 15 Years Leading teams in Manufacturing and Distribution operations for Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream and Procter & Gamble. Contact Information: • Email: lora.cecere@supplychaininsights.com • Blog: www.supplychainshaman.com (18,000 pageviews/month) • Forbes: www.forbes.com/sites/loracecere • Twitter: twitter.com/lcecere (9,300 followers) • LinkedIn: www.linkedin.com/in/loracecere (283,000 followers) • LinkedIn Influencer: www.linkedin.com/today/author/446631
Editor's Notes
- #30: Why the long tail is getting bigger