We obviously spend a lot of the supply chain managing and measuring inventories, but do we really well understand why we have inventory and especially how decisions about inventory are made?

That was the theme of a presentaton by analysyt Paul Lord at the Gartner Supply Chain Executive Conference in Scottdale, AZ this week.

Lord's presentation including the graphic below, adapted from the presentation, that provides a framework of what goes in to inventory decisions:

Source: Paul Lord, Gartner

Those inputs are:

Visibility to current inventories (on-hand, in-transit, etc.)

Analytics, such as provided by supply chain planning and other tools that help guide inventory decisions

Knowledge by managers about how to best execute the plans suggested by the analysis

Governance - sort of the missing piece, Lord said. What are the policies and rules that should constrain and inform inventory decisions?

Few companies really have formal governance frameworks for inventory decisions, but they are needed, Loard says, and he is doing on-going research on this interesting topic.

What do you think?

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