SNC led me to the Pain Point for Global Supply Chain: Inventory Management

This post consists of my learning & research moving forward from Supplier Collaboration to the "least productive asset" as it is commonly known: INVENTORY and its Future trends with technology

  

IS THIS TRUE IN TODAY'S WORLD??!!

 "The World that Isn't"

 The truth is not to have less but to have OPTIMUM Inventory. I am sure this raises an eyebrow and a reason to move ahead for all the seasoned Inventory and Material Management professionals who have always believed in the "More with Less" principle as stated by Richard Koch in the 1998 edition of his book "The 80/20 Principle: The Secret of Achieving More with Less".

The thought of increasing your bottom line by reducing your inventory is an old saga which would have given a burp of satisfaction to the cash flow authority in your organization and would help raise you in rank for bringing the right measures in place. But this is not going to work for the organizations who want to retain and increase customers in the long-run. As rightly stated and explained by Microsoft in its whitepaper published in 2003 exclusively for its Retail customers titled: “The Real Cost Of Inventory - Why You Can Have Too Much Of A Good Thing”. In this paper Microsoft takes into consideration some important parameters to gauge and derive at a holistic inventory approach to avoid stock-out conditions for products with drastic variations in sales forecast.

1. SKU intensity of the product

This is simply how many stock keeping units (SKU’s) you have per item.

2. Re-Order Cycle Time

The second factor that impacts inventory is what is termed “re-order cycle time” or simply how long it takes you to be re-supplied once
you have either run out or determined that you have need for more. The longer the cycle time the greater the amount of inventory that you
have to carry. The re-order cycle begins at the moment you determine that you need more inventory.

3. Nature of the Product/Merchandise

Some products are purchased every day/week by customers and some are purchased much more infrequently.

And finally the most talked about equalizer in the inventory world the GMROII which is a financial measure that tells us what return we are making on our inventory investment. It is the only financial ratio formula
that returns a dollar answer not a percentage. The question that GMROII answers is “For every dollar that I invest in inventory, what is my return?”