Can your team effectively leverage inventory optimization technologies?

Jeff Zoroya, Sr. Manager, SIOP Practice Thursday, May 10, 2012 If you had the inclination and resources to buy a high-performance sports car, would you...

Jeff Zoroya, Sr. Manager, SIOP Practice
Thursday, May 10, 2012

If you had the inclination and resources to buy a high-performance sports car, would you drive it in first gear?  I doubt it.  So, why are so many companies still struggling to develop an internal capability around optimal inventory target setting despite having the tools available or in place?  In my experience, I’ve found that when it comes to developing and maintaining a competency, the linchpin is “people.”  In the case of inventory targets, it comes down to the people responsible for developing a sufficient understanding of inventory targets during the initial software implementation, the retention of those people post-implementation, and properly training the new people staffed in that role when the original “resident IO expert” transitions into a new position.

Underlying these challenges is the fact that similar to other complex planning roles there is an engineering or quantitative flavor to inventory target setting that makes it different from other business or management roles.  Some companies fail to recognize the specialized skills necessary to make full use of an inventory target setting application and as a result staff the role with an individual that is reluctant to use the tool in a robust way.  But, even the companies that get this right may still, over time, find their competency eroding.  There are two common explanations:

  • The current planner is left in the position too long.  Feeling stagnant they suddenly depart for greener pastures within or outside the company; or
  • The individual rotates out the target setting role, and the new planner doesn’t have the required skills and/or receives inadequate training.

In either case, the end result is sub-optimal inventory targets.

The solution may be obvious, but it’s still worth mentioning.  If your organization is suffering from sub-optimal inventory targets, get help.  While we have always offered assistance in this area on a project basis, we are now working with our strategic technology partners to provide optimal inventory targets as an ongoing, outsourced offering.

This service allows companies to employ advanced tools and techniques for setting SKU and location-level inventory targets while unburdening their organization with the fragile staffing and training competency normally associated with acquiring niche advance analytical software. The stochastic inventory optimization technologies developed over the last decade have begun to mature and have demonstrated tremendous value to those who have successfully deployed them.  What’s keeping your supply chain team from shifting into high gear?

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