Improving Performance

Inventory Management IS Hard!

"...their concern over landed inventory is about as profound as a child's concern over the origin of a new baby (The stork brought it)."  
Distribution Management Review in,
     Transportation and Distribution Management Magazine,
 March, 1972

"inventory is another cross-functional sinkhole."
Are You the Weakest Link in Your Company's Supply Chain,
Harvard Business Review, September, 2007

Given these comments spanning a 35 year period, its not surprising to see a comment, "The price of inventory optimization is eternal vigilance," in the August 28, 2008 issue of the Supply Chain Digest Newsletter. 

Inventory management and inventory performance improvement is hard for a couple of key reasons.  

The first is that supply chains encompass broad information and material flows, large volumes and disparate types of data and span multiple organizations and entities.  Tracking and making sense out of this in a rapidly changing environment is a challenge.

The second reason is that inventory, by its very nature, is the result of decisions and actions made by many different people and their systems spread throughout the organization.  

When done with tens or hundreds of thousands of items every day, even small changes can have a significant cumulative impact.  And these changes can be in a multitude of areas: demand forecasting and loading, demand and supply variability, use or misuse of formal and informal systems, service level goals and standards, targets, metrics, organizational design and order policy variables along with the impact of operating policies and practices.

In companies I have worked with over the years, I have identified as least 15 different factors contribute to poor inventory performance that can be broken into four major categories:
  • Cultural
  • Organizational
  • Strategic 
  • Tactical
Improving inventory performance is not a matter of addressing a single factor since many factors are involved and each must be addressed.

I absolutely believe that inventory performance improvement is possible in every organization.  The first step is to believe that it is possible, the second is to begin the search for opportunity and then identify and implement the changes necessary.  This does not happen overnight, but it can be done and visible, measurable success is the reward.

If you would like to use these tools and ideas as a starting point to improve not only inventory, but your total supply chain performance, please feel free to contact me at David.Armstrong@inventorycurve.com.

  ® Inventory Curve, LLC, Westminster, Colorado USA

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