Inventory is a critical requirement to protect supply where ‘decoupling’ points exist in a supply chain i.e. where the input rate and the output rate differ. There are many points in the supply chain where decoupling points can exist, including raw material supply into manufacturing, component parts into sub-assembly and finished goods to end customer.
Despite many supply chain consultants referring to ‘synchronous material flow’, and the concept of perfectly aligning supply and demand, this is, at best only a workable concept for a company’s internal processes. In the real world it is rare that a company can ensure their external suppliers provide materials at a rate perfectly synchronised with their internal processes; or predict and control customer demand to the extent of synchronising their own outbound supply. Consequently, inventory is a critical element to protect supply in most businesses.
Once the criticality of inventory has been agreed by a business, and where that inventory should be held i.e. the decoupling points, then the next issue is how to optimise the inventory level through effective inventory optimisation.
In many businesses inventory levels are driven by rules of thumb i.e. ‘4 weeks supply’. The consequence of this is often lots of stock, but it’s just the wrong type and in the wrong quantity. Consequently, you continue to get customer service failures, the stock you do have doesn’t get used, and can ultimately become obsolete.
How can we help with Inventory Optimisation?
The team at Gideon Hillman Consulting can provide clear methods of approach to ensure that your businesses inventory levels are always optimised against the service levels you require, and at the same time, the inventory level is minimised to avoid unnecessary working capital.
Please see our Inventory Management section for further details regarding inventory optimisation, or contact our consulting team on +44 (0)1926 430 883