Are your inventories working for you or against you?
Like the tides, the balance of global supply and demand is constantly changing. This is not news. However, during the past few years global impacts have been exponential compared to times just half a decade ago. The uncertainties and unexpected events like Covid19, war in Europe and Suez incident, just to name a few, have led to challenges predicting changes in local and global business environment: Quickly turning tides bring strong currents. The familiar Forrester effect â€˜Bullwhip Effectâ€™ slashes through the operations worldwide. Now, more importantly than ever, the question arises: Are inventories a support or strain to your operations?
In the next chapters weâ€™ll share a few tips on how to manage in the wild currents of supply and demand.
Xray the linked processes in three horizons
Success in utilizing inventories effectively yet efficiently is determined by capabilities of decision making, operationsâ€™ processes and systems in three linked horizons:
- Long horizon: Successful budgeting, forecasting and long term supply and demand planning is getting harder. Companies that have been using solely statistical methods have realized the increasing need of having more agile and forward looking, predictive ways in place. It is also clear that business strategy work and scenario building requires nowadays many more outcomes to be considered.
- Mid horizon: Transparent and well built processes such as S&OP and proper inbound logistics models will provide agile, controllable and measurable toolsets to handle the upcoming supply and demand. It is increasingly important that mid horizon insights are linked to the long horizon to timely react to changes in facts and figures, to give input to steering the operationâ€™s tied-up capital targets. Also, if there is low or no visibility to what happens before and after your company in the supply chain, you risk getting the major hit from the bullwhip effect. Todayâ€™s business environment truly puts tactical level decision making, processes, tools and reporting systems into test.
- Short horizon: Everyday decision making in operation, say managing material push and pull execution, finally determines the total success of inventory management. Because of environmentâ€™s high volatility, close two-way connection to mid horizon activities needs to exist. Transparency and agility as well as proper tools to regularly update ERP parameters are essential. Light automation solutions such as RPA tools can nowadays be quickly built to support achieving situational awareness, timely parameter upkeep, and constant sharing of information within the supply chain.
To summarize, the key to utilizing inventories optimally can be found from the solid foundation of the organizational culture that is supported by well thought and fitting processes and wisely picked tools. But why do companies so often fail to build end-to-end visibility and resilience in their operations?
Especially during the past few years, it has been easy to fall to neglecting and losing sight to important information when entering the firefighting mode throughout the operations. When realizing the end results, such as excess inventory levels, it would be tempting to heal the symptoms quickly â€“ leaving the root causes intact.
We at Knowit can be your bridge over troubled waters
Our team of experienced and enthusiastic professionals guide clients every day in the field of manufacturing and retail business within and across all the planning horizons. Hereâ€™s how we have succeeded in supporting our clients tackle uncertainties and build future-proof business:
- In collaboration with our customers, we donâ€™t only heal the symptoms but build a foundation to repair the root causes
- We trust in managing the change with people by helping steering the way while avoiding the pitfalls â€“ only then the changes persist
- We are a hands-on partner who also walks the talk, and never offers ready text-book solutions â€“ we are known for building fitting processes
Like mentioned, the volatile currents of supply and demand are ever-present and the uncertainty is constantly increasing. Now is the time to learn how to catch the wave and navigate through the storm.
Have You experienced challenges with managing inventories, or do you want to build flexibility for future crises? If so, letâ€™s have a chat!