Is Inventory a Means or an End?


A few years ago I conducted a workshop for the operating committee of one of the world's largest industrial conglomerates. The heads of operations for each business unit plus the company's COO participated. We had a question and answer session at the end of the workshop. The COO asked the first question. "Dr. Frazelle, we have quite a bit of conflict in these meetings. Especially lately. Why is that?" I asked him what the charter of the group was. He said, "We have two main objectives. The first is to reduce inventory. The second is to lower our unit costs." I said politely, "You just answered your own question. Your main methods of reducing unit cost, far flung global sourcing from cheap labor sources and buying in large quantities to receive discounts, increase your inventory levels. The objectives are at odds with one another so you are at odds with one another."


They asked me what they should do about it. I encouraged them, like I encourage all our consulting and professional education clients, to take a step back and reconsider their objectives and their approach. I suggested that their objectives would preferably be to maximize return on invested capital (ROIC), improve perfect order percentage, spend whatever was required in total supply chain cost to support those objectives, and invest in whatever inventory level was required to accomplish those objectives. Sometimes that inventory level will be higher than we currently have and sometimes it will be lower. Inventory is not an end in itself; it is a means to an end.

INVENTORY SOLUTIONS

Inventory Optimization

SKU Portfolio Optimization

Forecast Optimization

Lot Size Optimization

Turn & Fill Optimization

Deployment Optimization

 

 

INVENTORY

PRODUCTS

RightChain Inventory

RightChain SKUs

RightChain Forecasting

RightChain Lots

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RightChain Deployment

TRANSPORTATION SOLUTIONS

 

Transportation Optimization

Lane & Flow Path Optimization

Network Optimization

Mode Optimization

Load Optimization

Fleet Optimization

TRANSPORTATION PRODUCTS

RightChain Transportation

RightChain Nodes

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WAREHOUSING SOLUTIONS

Warehouse Optimization

Storage Optimization

Picking Optimization

Slotting Optimization

Layout Optimization

Workforce Optimization

WAREHOUSING PRODUCTS

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RightChain Slotting

RightChain Flows

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STRATEGY

SOLUTIONS

Strategy Optimization

Service Optimization

Sourcing Optimization

Planning Optimization

Finance Optimization

Risk Optimization

 

STRATEGY

PRODUCTS

RightChain Strategy 

RightChain Sales & Service

RightChain Sourcing

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