Pitfalls of InventoryManagement
In a supply chain with multiple sites it is not uncommon tofind fairly autonomous management teams at each site. Theobject...
Companies often come to conclusions about what satisfiestheir customers without actually consulting their consumers.For ex...
Consumers like to track the progress of the products theyhave ordered. They wish to know when their order willarrive but t...
Data at different sites is often not linked and thisinformation has to be retrieved manually which can take along time. In...
In any inventory system it is always a risk as supplychains cannot ensure the quality of incoming products orthe time it w...
This is when we choose to use basic, static inventorypolicies, such as an ABCD classification, these are out-dated and jus...
operations supplying both internal and externalcustomers tend to focus on the latter, even though theinternal customer is ...
This is mostly focused on companies that must mergeproducts from several sources for final shipment to thecustomer. The pe...
This is when Transportation decisions is based on lowestlogistics costs, not total supply chain costs, especiallyinventory.
There is no standard approach for measuring the cost ofinventory, and companies often under-represent the totalcosts.
Basically, the challenges of operational silos. Theadvent of the “integrated supply chain organisation”addresses the probl...
Discrete manufacturing costs are the focus on productdesign considerations, not total supply chain costs.We’re making prog...
Decisions to open or close a manufacturing ordistribution center is looked at too narrowly, on thosediscrete costs alone, ...
Looking at the supply chain only to the first-levelcustomer (such as a distributor or retailer), not the endconsumer. This...
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Pitfalls presentation

  1. 1. Pitfalls of InventoryManagement
  2. 2. In a supply chain with multiple sites it is not uncommon tofind fairly autonomous management teams at each site. Theobjectives of each team may differ or even be conflicting.Changes at Site A might improve their performance but dueto the conflicting ideas and objectives the changes may notbe for the good of the entire supply chain.
  3. 3. Companies often come to conclusions about what satisfiestheir customers without actually consulting their consumers.For example the number of completed orders might bemore important than the shorter time it takes to send outincomplete orders in smaller batches.
  4. 4. Consumers like to track the progress of the products theyhave ordered. They wish to know when their order willarrive but they expect to have updated informationavailable to them to see where their order is in the deliveryprocess. If this information cannot be obtained it may resultin dissatisfaction, confusion and loss of goodwill.
  5. 5. Data at different sites is often not linked and thisinformation has to be retrieved manually which can take along time. In the meanwhile the wrong products are beingproduced and inventory backlog is increasing. This pitfallcan be combated by ensuring that all operating systemscan somehow be linked.
  6. 6. In any inventory system it is always a risk as supplychains cannot ensure the quality of incoming products orthe time it will take to receive these products. Investmentinto the wrong resources may also be a result of thesupply chain not being consciously aware of theuncertainties.
  7. 7. This is when we choose to use basic, static inventorypolicies, such as an ABCD classification, these are out-dated and just aren’t good enough. Stocking policiesmust be dynamic, and more considerate of variability ofsupply and demand.
  8. 8. operations supplying both internal and externalcustomers tend to focus on the latter, even though theinternal customer is using the input to then serviceexternal customers
  9. 9. This is mostly focused on companies that must mergeproducts from several sources for final shipment to thecustomer. The perception then: coordination is poor,resulting in expediting costs, poor customer service, andinventory buffers
  10. 10. This is when Transportation decisions is based on lowestlogistics costs, not total supply chain costs, especiallyinventory.
  11. 11. There is no standard approach for measuring the cost ofinventory, and companies often under-represent the totalcosts.
  12. 12. Basically, the challenges of operational silos. Theadvent of the “integrated supply chain organisation”addresses the problem, but in the end, this reallydescribes the heart of the supply chain challenge,doesn’t it?• Independent performance measures and incentivesystems at different sites• Barriers between manufacturing and distribution
  13. 13. Discrete manufacturing costs are the focus on productdesign considerations, not total supply chain costs.We’re making progress here, and the notion of“designing for total supply chain costs” has caught on inthe past few years.• No consideration of manufacturing and distribution inproduct-process design.• No consideration in design for customization andlocalization• Organisational barrier between design and the supplychain
  14. 14. Decisions to open or close a manufacturing ordistribution center is looked at too narrowly, on thosediscrete costs alone, not on the total supply chainimpact. With the use of network planning tools andgeneral supply chain thinking, I don’t believe this is at allcommon today.• Chain decisions without consideration of inventory andresponse time efficiencies.
  15. 15. Looking at the supply chain only to the first-levelcustomer (such as a distributor or retailer), not the endconsumer. This basic issue of course set the stage forDr. Lee’s subsequent work on “The Bullwhip Effect”, andis at center of today’s demand-driven supply chainparadigms.• Focus on internal operations onlyInadequate understanding of operational environmentand needs of immediate and ultimate customers.
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