The first step in our series is going to get at the heart of the issue with a single blunt truth:
YOUR COMPANY AND TEAM MEMBERS DON'T CARE HOW MUCH INVENTORY THEY CARRY.
Looking at the direct time investment of most of your teams, they spend their time doing the following:
1. Answering for fill rate issues
2. Researching why planned production or purchases weren't fulfilled
3. Minimizing the damage coming from unreliable suppliers
4. Finding a home for obsolescent inventory
Most companies are aware of their service levels to their customers and suppliers that have the most issues. Without data or analysis beyond that, planners are told to maximize service and
minimize the damage from the other issues.
These desires are noble, however this apathy exists in companies without a problem solving culture. Pretty soon they are adding warehouses, loading up on raw materials as well because every
time there is a problem the solution is more inventory, we've even seen companies and teams losing track of where their inventory is or why they put it there in the first place.
Reducing inventory leads to network simplification and many financial benefits:
1. Fewer warehouses
2. More Cash
3. Faster Inventory Turn
4. Paying for fewer turns in warehouses
5. Improved visibility
6. Ability to keep track easier
These are HUGE. Your teams don't even think about it. This isn't on their radar. Your company needs a PR campaign with your teams to educate these benefits. Quantify, what's the
size of the prize? How many fewer facilities? How does this help them get to their variable compensation? Identify targets and hold teams accountable.
In addition, the SOLUTION to an unreliable supplier isn't simply to carry more inventory. The solution to demand volatility isn't to make or buy product "just in case."
Your reasons for the inventory are ok, but you don't understand how much you need. The "reasons" are variation in the business. Visibility to your demand volatility, seasonality, quantified
supplier issues, lead times, and all components for the total cycle time of your entire supply chain will help. Need visibility to these and need to push other functions to help. How
can we level demand period to period? Is the cost to improve supplier reliability significantly lower than the cost of extra inventory?
Your culture MUST change if you're going to improve. Process evaluation, training, enhancements, systems, etc. If the desire is there, but support is needed.
Let Velocity create value and assist!
