Friday, January 31, 2020

It's a new day... let's fix our inventory

How do you go about inventory optimization on a daily basis? I hope it's nothing like the following...

Unfortunately, for lack of a rule-based system, this kind of planning and behavior can be observed more often than not. Of course, it is not quite so bad as described in above flow chart, but there are many close variations to it, in many plants and DCs around the SAP (or other) ecosystem.

implementing rules to your inventory monitoring and optimization system is an essential part of effectively managing inventories and providing high fill rates, but even more important - at least I believe so - is that you manage by exception and not randomly. Managing randomly means that you pick your candidates every day and see what's up. Much like in the flow chart here. Managing by exception means that you let the system decide what you're looking at, according to the rule that you gave the system (e.g. alert me when a fast moving, consistently consuming part that is expensive and has a long replenishment lead time exceeds 20 days of supply).

in my workshops or blog posts, I often talk about working on the system instead of in the system. What happens in above flow chart, is that the planner works in the system - expediting and firefighting randomly and almost the entire work day. That planner works for his/her inventory management system. Alternatively (and much more effectively) one could work on the system - making sure that the basic data, or policy, can enable the system to work for you.

Maybe, you can think more along the lines of the following...(as you can see, I'm not taking away from you the ability to still surf the internet)