Daily Archives: June 2, 2009

If There’s No Uncertainty, You’re Not Managing Your Inventory

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As noted in a recent Industry Week article on Inventory Optimization that noted how it’s all about uncertainty, these days, volatility and uncertainty pummel the network of suppliers, producers, wholesalers, distributors, and retailers that convert raw material to finished products for our homes and offices. That supplier in China may ship you 100,000 units this week, but only 20,000 units next week. That shipment may take 10 days to arrive or 20. Demand can be steady for weeks, then spike or drop unexpectedly, confounding the forecasts and causing excess inventories or product shortages. There’s uncertainty everywhere, and if you’re not managing it, you’re just waiting for a disaster.

The only way to thwart the problems caused by volatility and uncertainty is to gain visibility into all the factors needed to improve inventory decisions across the supply chain. The best way to do this is to implement a multi-echelon inventory visibility and optimization solution that keeps track of inventory levels, demand changes, real-time shipment updates, and uses inventory optimization to recommend optimal updates to forecasts, inventory levels, and shipments. Such a solution can often reduce inventory by 20% to 30%, improve service levels, ad cut cycle times by 10% to 20%, especially when guided by an expert that uses the visibility to make manual adjustments as soon as new information is available.

Some Tips on Building an Agile Organization

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A recent article in Business Intelligence had some good tips on how to build an agile organization. Since agile organizations have the processes and structures that enable them to know what is going on both internally and externally, as well as to provide the mechanisms needed to act quickly on that knowledge, agile organizations are more likely to survive in tough markets … especially if the agility extends to the supply management organization.

While many people might associate agile with technology, since agile development was the hot trend a few years ago, there is some evidence to suggest that agility has as much to do with the standard operating practice of a company, and that the best way to achieve agility is to follow some basic organizational and managerial practices and principles that allow you to see the organization in a different light, provided you have a willingness to adjust and change as needed.

To this end, the Business Intelligence article on building an agile organization listed three tips that will get you well on your way to an agile organization.

  1. Lean to Sense and Respond
    • establish relationships with your customers, suppliers, and partners and have them feed you timely information
    • create structures and processes to organize and distill the information into knowledge you can act on
    • assess how business technology investments are handled and optimize future spending
  2. Emphasize Improvement and Innovation
    • follow best practices, listen to your customers, and improve existing capabilities
    • focus on creating innovative processes through new technologies, services, and strategies
    • combine continuous improvement and innovation initiatives to constantly reposition yourself as a market leader
  3. Distribute and Coordinate Authority
    • adopt radically different forms of governance that distill your mission and objectives into easily understandable cores
    • replace traditional command and control approaches with those that facilitate coordination
    • supplement processes with personal accountability