Supply Chain Illustrated

Truth

The Truths of Inventory Management

Many companies are embracing technology to provide solutions that attempt to improve precision, actually making us more dependent on precision throughout the supply chain at the same time they acknowledge that our world is becoming less and less precise and our business is less and less able to be precise.  Expecting precision to work over longer periods of time with increasing variability along the way is the problem.  Trying the same thing over and over, using only wishing and hoping as an improvement strategy is not working.

This leads me to the following truths of inventory management.

  1. If we have the right inventory available, we are able to sell or produce our products. Not having the right inventory is a guaranteed disruptive situation.
  2. We cannot determine a level of too much or too little inventory unless we can determine a target range of inventory by individual part number.
    • Subnote a: Overall inventory value cannot be significantly reduced without evaluating inventory by each individual part number.
  3. When tying an imprecise, predicted, single number (forecast) to a precise production schedule, variability will disrupt our production and our ability to serve our customers.
  4. The larger the time gap between customer willingness to wait and cumulative lead time, the more impossible traditional MRP processes become.
  5. The longer we insist on holding a schedule constant, the less likely that schedule will match the ever-changing needs of our customers.  
  6. Our desperate search for cost reduction must be replaced with a relentless search for improvements to systemic flow.
  7. The more complex the scenario, the more detailed the planning effort must be.
  8. High levels of firefighting and heroic problem solving are symptoms of serious problems in your planning process.
  9. Visibility must be focused on indicators of problems with enough time to prevent them. And it must provide feedback on whether our actions create our intended impact.
  10.  All personnel, including Leadership, need more than awareness of situations, they need to share a common method for early alert, evaluation, and action planning. We should not rely on one special individual who always “just seems able to handle it.”

We know intuitively that we must be agile in order to meet the changing and volatile customer demand. Why do we continue to insist that precision and the resulting chaotic emergencies are the best way to achieve agility?

The solution lies in using technology to improve the visibility of events or trends that will impact or disrupt supply chain in time for us to react, adapt, and prevent.  If we continue to focus on visibility of the wrong things, or awareness too late to react, we’ll continue our downward spiral into chaos.

Explore Demand Driven MRP.  Visit BecomeDemandDriven.com or email me.

John Melbye, DDPP, DDLP, CSCP

Share this post

Contact Us

Located in Minneapolis, MN.
Serving the entire United States