Six Critical Problems in Rapid Inventory Reduction Programmes
GLOBAL RESEARCH FINDS SIX CRITICAL PROBLEMS COMPANIES FACE IN THEIR RAPID INVENTORY REDUCTION PROGRAMMES
Following are the abridged findings from a recent global research:
- Double edged sword- Misuse of information technology tools
It is common problem to rely either too littleor too much on information technology during Rapid Inventory Reduction Programmes. By using the IT tools too little, companies increase the analytical cycle time and hence reduce the efficiency of their Rapid Inventory Reduction Programmes. Conversely, relying too much on these tools, companies lose sight of the limitations inherent in the tool of choice; they become enamoured by the model rather than being focused on the goal. They ignore the change management fundamentals. In either case they fail to achieve the envisaged outcomes in the anticipted timeframes.
- Living in the past – sticking to outdated business models
Many companies have based their inventory expectations on business models, strategies or even on assumptions that were valid in the past, but are now outdated. New models, new strategies and new facts must be taken into account.
- Misaligned incentives – people working at cross purposes
The bonus schemes, performance measurement protocols, team objectives and other incentive schemes are rarely aligned fully and properly to work towards the common goals of the Rapid Inventory Reduction Programmes.
- Yo-Yo Diet Syndrome – inventories bouncing up and down
In many companies it is curtomary to reduce theinventories for a short period, just before important financial reporting periods. This weight reduction to fit into a “wedding dress” only leads to the Yo-Yo Diet Syndrome and all the associated long term problems.
- Lack of understanding of the bull-whip effect on inventories
Despite the popularity of “The Beer Game” illustrating the impact of the bull-whip effecton upstream and downstream supply chains, many companies still do not adequately undestand and allow for it in their supply chain planning cycle. As a result they are often caught by surprise with too little or too much inventory.
- Misunderstanding of the key drivers of inventory targets and algorithms
While most people intuitively understandthe key reasons why inventories bloat up, in many cases the key drivers as well as the underlying algorithms are not well understood. This lack of understanding accompanies either too much reliance on these algorithms or complete cynicism towards their usefulness in inventory target setting. A balanced view is difficult to achieve under these circumstances.
The Rapid Inventory Reduction Programmes
The Rapid Inventory Reduction Programme is one of the highest demand areas of activity in the overall Supply Chain Management sphere. The analysts, Boards, CEOs, and senior executive teams are all actively engaged in ensuring that the inventories remain within reasonable limits.
To help you make sure that your inventory reduction programme does not founder from any of the critical problems, Global Supply Chain Group has created a suite of packages for your business needs.
These packages can save your company:
- Millions of dollars of inventories.
- Thousands of man-hours of man-hours of inventory reduction project-time .
- From allegations of reduced service levels as a result of inventory reduction.
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