February - 2020 9logisticstechoutlook.cominvestment and rightfully so. But in order to get the ROI, we need to right-size our stock position and understand the purpose of the stock. Therefore, stock is not longer just stock, now it has a purpose and a given lifespan. In an increasingly complex environment where SKU proliferation is the norm and demand is coming at you from a whole host of channels, demand planning and more importantly demand sensing becomes the first line of defense to keep your inventory under control. Demand planning well framed under a consistent S&OP (SiOP or IBP, whatever your process of connecting the planning functions of each department in the organization to align operations and strategy with the organization's financial performance is named) will pay off great benefit in reducing your inventory numbers and generating cash flow from within the organization.In my particular case, the demand review happens in the first 15 days of the month, where we generate and distribute a statically generated forecast to sales, incorporate any market intelligence from the field into the system and aggregate all the inputs up to the SKU-DC level before proceeding to inventory and production review, where we integrate demand with supply and identify potential gaps. Regardless of what you set up is, what holds true every time is the fact that demand planning if not integrated into the business processes and if the result of the demand planning process is not a consensus forecast between planning, operations and finance, then your chances of success are subpar.Inventory is not Against Shareholder ValueLastly, I want to bring a bit of sense to the whole inventory reduction and CCC improvement craze going on. On any supply network there are two buffers against variability: stock or redundant manufacture capacity. Unless you are Inditex or any other company sitting on a lot of idle manufacturing capacity, stock is your best insurance against stock out and the cost associated with it. And when I am talking about costs, I am not necessary talking about the lost sales only, but everything that comes with that: lost market share, brand loyalty damage, potential customer late penalties, etc.Buffer stock, cycle stock, demand sensing and demand planning are all tools that will help you get better to do what we are all supposed to be doing: delivering great products or services, when needed, where needed, as needed. A word of caution: technology can be an enabler for all these things to happen, but if you do not have a process to support the technology, do not expect that the software by itself will be a silver bullet, it is not going to work.Shareholders will always demand more value out of the stock and that is ok. It is on us to convey the message of what is the right level of inventory and how that inventory is bringing value to the organization. On any supply network there are two buffers against variability: stock or redundant manufacture capacity
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