How do you rapidly and reliably deliver the highest levels of service from the lowest levels of inventory?
Organisations are finally measured on their ability to deliver increasing return on invested capital. A large component of this return is determined by the levels of capital tied up in inventory. Whilst inventory is certainly required to generate sales, holding an excess eats into profits and ties up cash.
The typical problems faced by distribution systems are:
- Outlets run out of inventory
- Outlets have an excess of inventory
- Outlets feel the need to discount to remove excess inventory
- System inventories are high and stock turns are low
- Inventory ageing may cause spoilage and sub-standard product performance
- New product launches are delayed whilst old inventory is cleared
- Plants and warehouses are frequently forced to expedite product
Organisations attempt to mitigate the affects of these issues by forecasting demand. However forecasting does not work particularly effectively because:
- It is complicated to administer and yet is often too simple to match complex patterns of demand
- Who will buy what, from which outlet on any given day is impossible to know
- Forecasting diminishes in accuracy the longer its range
Finding the right balance between the competing demands of reducing inventory and increasing the level of customer service appears to be an intractible problem that offers the manager a zero-sum game between too much cash tied up in stock, or profits lost from missed sales.
Ensemble Partners can show you how to achieve extraordinary levels of customer service off the lowest possible levels of inventory.
The key to the solution lies in:
- Aggregating variability as far up the supply chain as possible.
- Knowing and measuring the three components of lead time:
- Order lead time
- Production lead time
- Transport lead time
- Understanding the variation of demand and lead time.
- Order daily, replenish frequently.
Through the Ensemble approach to Distribution Management, we help you increase revenues, reduce operating costs and minimise risk, making your invested capital work smarter.
Call us on +61 2 9387 3955 to find out more.