Inventory optimisation has the power to transform businesses by drastically reducing stock levels. But it has long been considered as an ideal by consultants and only appreciated by a select few in the real world of supply chain management.
That situation is changing and the inventory optimisation philosophy is fast gaining a foothold, with the main drivers towards its use being a desire for improved planning processes and, perhaps most importantly, increased sales.
In today’s globalised market, lower inventory levels are paramount if organisations are to maximise international sourcing capabilities. The right mixture of IT systems, processes and culture is needed for inventory optimisation to be successful.
As an example of where the market is moving on this issue, we recently undertook a complete analytical audit of a construction business’ inventory management process. We were able to reduce the company’s stock levels by about approximately 40 per cent by the adoption of supply chain best practice.
Freeing up such a large amount of stock that had previously been considered crucial to the operation has had a significant impact on the business, freeing up considerable sums that are now being invested in other parts of the organisation.
Conservative estimates reckon that as many as 60 per cent of UK industrial businesses are ripe for an inventory optimisation revolution. In a nutshell, far too many businesses are simply carrying too much stock as a result of inefficient, flabby supply chains.
This is one of the reasons the tide is shifting inexorably towards logistics outsourcing.
Undertaking such a fundamental change in the way a business operates can be nerve-racking. Management teams often fear losing control, even when their incumbent operations add more hassle and customer dissatisfaction than value. The challenge for supply chain managers is to understand where the logistics function makes a difference to the business and how it can be most efficiently undertaken at the lowest cost.
Jonathan Shortis is commercial director at DHL Exel Supply Chain