Expert Insight: Guest Contribution

By Jim LeTart ,
Director of Marketing,

RedPrairie

Date: March 4, 2010

Supply Chain Comment: Is Inventory a Corporate Asset?

Traditionally, of course, we would answer yes to this question. It is what we make in our factories, store in our warehouses, and deliver to our customers to generate revenue. But in today’s demand-driven, out-sourced, flow-through, vendor managed inventory environment, it seems more like a hot potato we want to pass off to someone else. We want as little of it as possible for the shortest time possible to improve flexibility and return on capital. Doesn’t really sound like an asset, does it?

 

In the 21st century global marketplace where the consumer rules, it’s all about speed, cost, quality and service – sort of “better, faster, cheaper” on steroids with a strong customer service flavor. Inventory is still important – it’s what we deliver to customers. But we may not own it for long, if at all. This has huge implications for how we structure our supply chains and the technology we use to support them.

The New Supply Chain


Total vertical integration is about dead in most industries. If you don’t outsource all manufacturing, you probably at least outsource sub-assemblies, components or parts. You may use flow-through or cross-docking to minimize handling and storage while speeding delivery. You may use late stage customization to reduce initial SKUs. You may even have products shipped direct from your supplier to the customer or your stores, or have a 3PL do it for you.

 

The key is you want to take possession of this inventory as late as possible, but you need visibility to it as soon as possible so you can better plan and better serve your customers. But traditional supply chain systems are designed to work within boundaries such as inside the four walls of the warehouse or inside your enterprise. They don’t accommodate the “minimized possession” paradigm of today’s out-sourced, multi-channel supply chains.

Inventory As a Demand & Supply Network Asset


We need a new class of supply chain systems that recognize inventory is an asset across global demand and supply networks, regardless of who owns it at any given step in the process. Systems that “right-size” network-wide inventory, not just the piece I own at a certain time. And systems that provide network-wide visibility so we can truly balance demand with supply.

 

This starts with understanding real demand at the store shelf through demand-sensing capabilities that forecast demand from the item within store level all the way up through distribution and production to the raw materials required. One forecast to get everyone working from the same playbook, eliminating the bullwhip effect of forecast error.

 

Then you need execution systems that manage the flow of goods and information from the original source all the way through to the customer, or even your customer’s customer. These multi-party systems should not only provide end-to-end visibility and control, so you know what is in production, what is in-transit, what is in the DC and what is on the store shelf, but also alert you to the inevitable events that disrupt supply chain flow and help you to react in a timely matter. These systems would thus manage inventory as a network asset, from supplier to the store shelf, making you and your network partners more efficient, competitive and profitable.

Agree or disagree with with our guest contributor's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the website. Upon request, comments will be posted with the respondent's name or company withheld.

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About the Author

Jim LeTart has over 30 years of sales and marketing experience in the systems technology field. He has spoken at numerous national and regional trade events and his work has been published in many industry publications. For the past 10+ years Jim has been Director of Marketing for RedPrairie, the largest best of breed productivity solutions provider, where he has responsibility for product marketing, analyst relations and advertising. Jim has an Industrial Engineering degree from Marquette University and an MBA in Industrial Relations from the University of Michigan.

 

LeTart Says:


We need...systems that provide network-wide visibility so we can truly balance demand with supply.


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